A5.13 An 'expected value' can be calculated by multiplying the probability of a risk occurring by the costs associated with a risk materialising - see Box 21 below.
Box 21. Example of Single Point Probability
Case study: Single point analysis | |
Annual cost of service | £2 million |
Estimated additional cost of project overrun | £200,000 |
Estimated probability of risk occurring | 10% |
Estimated value of risk = £200,000 x 10% | £20,000 |