Switch technology, Have you considered the opportunity to change Switch between conventional and markets, products inputs (use of materials), outputs (products and new technologies or methods of markets) and use technology during operation to delivery. improve the business case? Grow (project or Have you considered benefits from new Reserve space for additional corporate growth) technology, market access, knowledge and lanes. experience gained during this investment project? Use technology developed in Have you accounted for the fact that exercising other projects/markets. one option can open up further options? Time Have you considered the optimal timing for Delay project until information on making an investment decision based on costs and/or benefits are more information becoming available or investment certain. conditions improving? Invest in better information earlier. Does the value of deferring exceed that of Delay procurement until investing now? completion date is more certain. Phase Have you considered the opportunity to divide a Staged development on project or investment into separate investments priority needs. that can be phased over time? Invest early in elements of a Did you consider adjusting the definition of a project with long delivery times, consecutive phase based on the results of the with flexibility to invest in high cost previous one? elements of a project when required. Scale Have you considered the opportunity to adjust the temporary peak hour car pool capacity both up and down? or bus lanes. Table : Identifying scope for flexibility within your investment strategy Also consider if flexible decisionmaking is required to ensure: benefits can be achieved under uncertain circumstances (uncertainty in demand); for money can be achieved under uncertain circumstances (uncertainty in market supply); and there is scope to minimise Government’s obligations in situations characterised by uncertainty and irreversibility. Step 3: Draw the triage together determine the most appropriate approach for – dealing with uncertainty for your investment proposal At this agencies should have a good understanding of the uncertainty that impacts the investment, its vulnerability to the uncertainty and the capacity of the investment to respond to the uncertainty. You need to draw all this information together to determine any managerial actions that could be taken to address uncertainty during the investment’s life, and whether detailed real options analysis and valuation is warranted in the business case. Agencies should liaise with their DTF representative to confirm the appropriate application of real options for each investment. 4.2.3 Conceptualise summary Key decision point End of Stage 1: Conceptualise –
Switch technology, markets, products Have you considered the opportunity to change inputs (use of materials), outputs (products and markets) and use technology during operation to improve the business case? Switch between conventional and new technologies or methods of delivery. Grow (project or corporate growth) Have you considered benefits from new technology, market access, knowledge and experience gained during this investment project? Have you accounted for the fact that exercising one option can open up further options? Reserve space for additional lanes. Use technology developed in other projects/markets. Time Have you considered the optimal timing for making an investment decision based on information becoming available or investment conditions improving? Does the value of deferring exceed that of investing now? Delay project until information on costs and/or benefits are more certain. Invest in better information earlier. Delay procurement until completion date is more certain. Phase Have you considered the opportunity to divide a project or investment into separate investments that can be phased over time? Did you consider adjusting the definition of a consecutive phase based on the results of the previous one? Staged development on priority needs. Invest early in elements of a project with long delivery times, with flexibility to invest in high cost elements of a project when required. Scale Have you considered the opportunity to adjust the capacity both up and down? temporary peak hour car pool or bus lanes. Table : Identifying scope for flexibility within your investment strategy Also consider if flexible decisionmaking is required to ensure: benefits can be achieved under uncertain circumstances (uncertainty in demand); for money can be achieved under uncertain circumstances (uncertainty in market supply); and there is scope to minimise Government’s obligations in situations characterised by uncertainty and irreversibility. Step 3: Draw the triage together – determine the most appropriate approach for dealing with uncertainty for your investment proposal At this agencies should have a good understanding of the uncertainty that impacts the investment, its vulnerability to the uncertainty and the capacity of the investment to respond to the uncertainty. You need to draw all this information together to determine any managerial actions that could be taken to address uncertainty during the investment’s life, and whether detailed real options analysis and valuation is warranted in the business case. Agencies should liaise with their DTF representative to confirm the appropriate application of real options for each investment. 4.2.3 Conceptualise summary Key decision point – End of Stage 1: Conceptualise
Investing%20under%20uncertainty%20-%20real%20options%20ILG%20technical%20supplement%20-%20Version%201%20June%202018.docx