Real Options Analysis

When it comes to decision making Real Options Analysis is the single most important tool available, by focusing on the temporal aspects of risk and attempting to accurately capture the potential for future value in the decisions made today. Real Options Analysis is based on Black Scholes financial options theory.

"If we being down the path from point A what options will open for us and what will we gain by having those options?"

• The 'real' power behind Real Options Analysis is the journey taken to identify the options in the first place:

  • An option is the opportunity to make a decision after you see how events unfold

  • Option valuations are aligned with financial market valuations

  • Option thinking can be used to design and manage strategic investments proactively

  • Reduces the significance of the estimated contingencies factored in to the project

• Capital investment decisions are made following:  

  • A disciplined thought process

  • A traceable process

  • Analysis of uncertainties inherent in the decision

  • Understanding and value of managerial flexibility