Grasping opportunities, recognizing risks

Informed decisions on large-scale, capital-intensive investments
in crisis situations

CONTATTO LN Ricerca
Stern Stewart & CO. GmbH
Salvatorplatz 4
80333 Monaco

Contatto
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Starting situation – not all investments automatically create value

Opening up new markets through targeted investments, both domestic and foreign, forms the core of every expansion strategy. At the time of the financial market crisis, our customer was considering an innovative but also risky and capital-intensive investment opportunity, for which the assumptions made in the business case could not by adequately verified. This meant there was no well-founded basis for weighing up the opportunities and risks. The challenge lay in using a realistic opportunity/risk profile to find out whether the planned investment would ultimately be rewarded by the market.

Project approach – creating transparency through a consistent evaluation of risk and opportunity

The solution combined a standardized assessment of the investment options under uncertainty with a critical analysis of the business model. The assumptions forming the basis of the business case were thoroughly examined and systematically compared. An objective assessment of both the market potential of the investment and the company’s ability to implement it was provided, which was validated using scenarios. This guaranteed comprehensive, comparison-based support for decision-making.

Finding – large-scale, capital-intensive investments are possible, even during troubled times

Complex, capital-intensive investments can pay off, even in times of crisis and within highly volatile markets, provided that the risk is proportionate to the expected profit. For this, is it essential that the decision-making is supported by a transparent and well-founded assessment providing a clear understanding of the risks and opportunities associated with the investment. In general, standard investment appraisal tools are not suitable for this.

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