# Example with formulas Beta Value in PERT, Expected Monetary Value (EMV) and Risk Priority Number

### 1. Beta Value in PERT

Formula: Beta = (Pessimistic + 4 Most Likely + Optimistic) / 6

Beta value in PERT (Program Evaluation and Review Technique) is a weighted average taken from three values. Optimistic Value, Most Likely Value, and Pessimistic Value. Suppose a task takes 5 days to finish on average, but when things do not go according to plan it could take up to 10 days. When prioritized and everything goes according to plan it can be completed in 3 days.

3 becomes the Optimistic Value, 5 is the Most Likely Value, and 10 is the pessimistic value.

So, Beta value will be (3 + (4x5) + 10)/6

= 5.5 days.

This is also sometimes calculated without giving weightage to the most likely value

In that case the calculation will be (3+5+10)/3

= 6 days

### 2. Expected Monetary Value (EMV)

Formula: EMV = P x I

EMV or Expected Monetary Value is a concept in risk management. It is calculated by multiplying the probability of an event and the impact of it.

Let’s say that we have estimated the probability of an event to be 1/3rd or 0.33. If that event occurs it would cost, you \$6000. In this instance EMV would be calculated as

6000 * 1/3 = \$2000

This value will help you assess and compare the magnitude of risks and prepare for them.

### 3. Risk Priority Number

Formula: RPN = Severity x Probability x Detection

Risk Priority Number or RPN is a value that will help you rank the risks of tasks. This is calculated by multiplying three values.

Severity – denoting the severity of the risk.

Probability – denotes how likely the severity would be.

Detection - represents the ease with which it can be detected.

The rankings are done in a reverse order. For example, if there are 50 risks the one with the highest risk will be ranked 50. The one with the highest likelihood of happening will get the highest numerical value and under detection the highest number would go to the risk that is hardest to detect. The value is usually represented on a scale of 0 to 1. With a risk that has a high severity, high probability, and low chance of getting detected will have values close to 0.9 and the lower risk tasks will have values closer to 0.1.

By multiplying the three values you get the RPN. The RPN can be used to decide which task requires more focus and control from the perspective of project success or risk mitigation. The higher the value of RPN the more attention it should be given.

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Purpose Formula Description Calculate Beta Value in PERT (Program Evaluation and Review Technique) Beta = (Pessimistic + 4 Most Likely + Optimistic) / 6 This equation finds the expected value by giving weightage to the most likely Value. Calculate Estimated Monetary ...

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