Worked example: spend 1,500 to reduce expected cost by 2,800
A 30% chance of a 12,000 event gives an expected cost of 3,600. If a 1,500 action reduces the chance to 10% and the impact to 8,000, residual expected cost is 800. Action plus residual expectation is 2,300, so net expected benefit is 1,300. The break-even action spend is 2,800.
Expected value is not a confidence reserve
In the simplified original model, the event costs either zero or 12,000, not 3,600 in each project. An average can compare actions, but cannot tell you the cash needed in the event branch or the probability that a quote protects a margin. Read the mitigation decision walkthrough and contingency without double-counting.
Test the residual assumption
Record why the action changes probability or severity, who will perform it and what evidence would confirm completion. Try a weaker effect as a second scenario. For multiple risks, dependencies or uncertain severities, use the full project model. This tool assumes a single event and a certain action cost; it does not measure safety, reputation or other non-monetary consequences.
Frequently asked questions
What does a negative break-even action cost mean?
The entered residual expected risk cost exceeds the original expected risk cost. Even a free action would worsen expected monetary cost under those assumptions.
Does positive expected benefit guarantee a saving?
No. Expected values average across modeled outcomes. One project can still incur the mitigation cost and the residual event.