Professional Documents
Culture Documents
Management
Risks and Risk Management in Infrastructure
Projects
Agenda
1.
Risks in Infrastructure
2.
3.
4.
Decisioneering
(Probabalistic)
Managerial
(Strategic)
Pay-Offs
Your Initial
Investment
= $1,000,000
Traffic
Volumes
Revenue
H(igh)
$1,400,000
M(edium)
$1,200,000
L(ow)
$500,000
Good
OK
Bad
High
0.6
0.4
0.1
Medium
0.3
0.45
0.3
Low
0.1
0.15
0.6
Decision
Variable
State
Variable 1
State of the Economy
Good
Invest
0.25
OK
0.45
State
Variable 2
Traffic
0.6
H
M
0.3
L
0.1
H
M
L
Outcome
Prob
1.4 M
0.15
1.2 M
0.075
0.5 M
0.025
0.4
1.4 M
0.18
0.45
1.2 M
0.2025
0.15
0.5 M
0.0675
0.1
1.4 M
0.03
0.3
1.2 M
0.09
0.6
0.5 M
0.18
Bad
Do Not
Invest
0.3
H
M
L
1M
Total 1
EV = (Outcome * Probability)
= $1,081,250
Since this value is greater than the initial
Investment of $1,000,000 a risk neutral investor
will invest
Risk Management
Thank You