The approach
Make the no-action option explicit, then compare complete expected costs. Keep financial efficiency separate from whether the worst case is tolerable.
- Describe the event, impact and probability on one consistent time horizon.
- Estimate how the response changes exposure, including its cost and new risks.
- Compare expected cost, check the full downside, and assign an owner and contingency.
Worked example
A gateway delay has a 25% chance of €40,000 additional work. A €5,000 response reduces the estimated chance to 10%. The resulting net expected benefit is €1,000.
Try the inputs
Limits & next steps
The reduction in probability is an assumption, not a consequence guaranteed by the spend. Do not net a speculative gain against money needed for a possible loss.
Source & further reading
This explanation and worked example are independently written. The linked publication provides context for the technique; it is not a licence to reuse its material.