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Traditonal Valuation
+ Strategy
+ Risk Assessment
+ Risk Management
= Realistic Valuation
+ Strategy
+ Risk Assessment
+ Risk Management
= Realistic Valuation
InformeDecisions offers five key capital investment related services to private, public and government organizations. These all have Uncertainty as a central focus to ensure that any resulting valuation realistically accounts for the effects of activist Risk Management. They include,
- F
raming (or strategy development of) the client's Problem/Opportunity, to identify, articulate and lay out chronologically all the key uncertainties which will have to be faced over the investment horizon, as well as all the alternative ways in which these uncertainties might be managed (the client's Real Options). This step is entirely qualitative and is meant to provide a basis for subsequent spreadsheet and uncertainty modeling. It is a fairly quick process, which can run anywhere from one to five days. It is also a key process, since it provides the basis, not only for modeling but, as well, a roadmap for subsequent data gathering, such as engineering studies, ensuring that such data gathering is properly focussed.
Analysis where a Framed model is populated with data within standard Excel financial model spreadsheets and the uncertainties and Real Options modelled in the complementary user friendly DPL™ software. Here the spreadsheet and the DPL™ software are linked to simulate all the possible outcomes of the investment strategy. These analyses deliver two key results:
- A Tornado Diagram, illustrating the relative importance of each uncertainty so as to provide a basis for focussing modeling efforts only on the most important uncertainties.
- A Risk Profile, showing, among other things, the probability that the investment will succeed, the probability the investment strategy will destroy value, the volatility of the results and the expected outcome.
- A Tornado Diagram, illustrating the relative importance of each uncertainty so as to provide a basis for focussing modeling efforts only on the most important uncertainties.
Risk Management, where the optimal reaction to every possible combination of uncertainty outcomes is determined. Here, the value of all available Real Options, individually as well as in total is determined. This is of critical importance for the sound management of Risk. For example, if it is determined that more capacity might be needed in the future, it would be important to calculate the value of a Real Option to have that capacity available if it is indeed needed.
- V
aluation, where the optimal decision strategies, as well as the most likely or expected outcomes are chosen to provide a single valuation for reporting and consolidation purposes.
- Training, two day classroom sessions, where analysts learn how to apply the True Risk Valuation™ concepts - particularly Real Options - and how to use the DPL™ software
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