As per the risk analysis process carried out for a project, two risks are registered. The probability risk A will occur is 40% and its monetary…

In risk management, to calculate the contingency budget for risks, we use the Expected Monetary

Value (EMV) formula: EMV=Probability of Risk×Impact of Risk\text{EMV} = \text{Probability of Risk}

\times \text{Impact of Risk}EMV=Probability of Risk×Impact of Risk

For Risk A:

Probability: 40% or 0.40

Impact: US$100,000\text{EMV of Risk A} = 0.40 \times 100,000 = US$40,000

For Risk B:

Probability: 60% or 0.60

Impact: US$20,000\text{EMV of Risk B} = 0.60 \times 20,000 = US$12,000

Total contingency budget = EMV of Risk A + EMV of Risk B

40,000 + 12,000 = US$52,000

Thus, the total contingency budget required for both risks is US$52,000. This approach follows PMI’s

risk management guidelines, specifically under the "Quantitative Risk Analysis" process. This process

focuses on determining numerical probabilities and monetary impacts to compute the expected

financial impact of identified risks  .