Risk · tool 5 of 7
Decision Trees and Expected Value
Decision Trees and Expected Value: compares uncertain options with numbers.
Best for: Risky choices · Time: 1 hour
Domain: Risk · Focus area: Planning
How it works
Expected monetary value multiplies each outcome by its probability and adds them up. A decision tree lays out choices and chance events, so that you can compare options fairly.
- It’s a guide, not a prediction.
- Be honest about probabilities.
- Check how sensitive the result is.
How to apply it
- Draw each choice.
- Add outcomes with probabilities and values.
- Calculate expected value.
- Test different probabilities.
Try it
In practice
30% chance of a €50k penalty is an expected cost of €15k, so a €10k prevention pays off on average.
Pro tip
A good average can still hide a loss you can’t survive. Look at the worst case too.
Quick check
A 20% chance of losing €10,000: what’s the expected value?
Sources
- PMBOK® Guide, 8th edition, and The Standard for Project Management (PMI, 2025)
Last reviewed 2026-11-02 against the PMBOK® Guide, 8th edition · Practitioner review pending · How this guide is made