Option-based management of technology investment risk

Author

Benaroch, Michel

Author_Institution

Sch. of Manage., Syracuse Univ., NY, USA

Volume

48

Issue

4

fYear

2001

fDate

11/1/2001 12:00:00 AM

Firstpage

428

Lastpage

444

Abstract

Real operating (flexibility) options embedded in a technology investment are valuable because they allow management to take rational, value-adding actions that could favorably affect operational traits of the investment (timing, scale, scope, etc.). These options, however, are not inherent in technology investments. Rather, they usually must be carefully planned and designed to fit each investment differently. Building on concepts from the area of financial risk management, this paper presents a methodology for planning the creation of specific operating options designed to maximize the value of a technology investment in light of the risks underlying that investment. The paper also illustrates the use of the methodology in the context of a Web-based information technology investment

Keywords

costing; economics; information technology; investment; management of change; risk management; Web-based information technology investment; change management; financial risk management; option-based risk management; specific operating options creation strategy; technology investment; value-adding actions; Buildings; Costs; Fuels; Investments; Petroleum; Risk management; Switches; Technology management; Technology planning; Timing;

fLanguage

English

Journal_Title

Engineering Management, IEEE Transactions on

Publisher

ieee

ISSN

0018-9391

Type

jour

DOI

10.1109/17.969422

Filename

969422