Framework for investment decision-making under risk and uncertainty for infrastructure asset management

Piyatrapoomi, A, Kumar, A and Setunge, S 2004, 'Framework for investment decision-making under risk and uncertainty for infrastructure asset management', Research in Transportation Economics, vol. 8, pp. 199-214.


Document type: Journal Article
Collection: Journal Articles

Title Framework for investment decision-making under risk and uncertainty for infrastructure asset management
Author(s) Piyatrapoomi, A
Kumar, A
Setunge, S
Year 2004
Journal name Research in Transportation Economics
Volume number 8
Start page 199
End page 214
Total pages 16
Publisher JAI Press
Abstract A study has been conducted to investigate current practices on decision-making under risk and uncertainty for infrastructure project investments. It was found that many European countries including Australia, the U.K., France, and Germany use scenarios for the investigation of the effects of risk and uncertainty of project investments. Different alternative scenarios are mostly considered during the economic cost-benefit analysis stage. For instance, the World Bank requires an analysis of risks in all project appraisals. Risk in economic evaluation needs to be addressed by calculating the sensitivity of the rate of return for a number of events. Risks and uncertainties of project developments arise from various sources of errors including data, model and forecasting errors. It was found that the most influential factors affecting risk and uncertainty resulted from forecasting errors. Data errors and model errors have trivial effects. It was argued by many analysts that scenarios do not forecast what will happen but scenarios indicate only what can happen from given alternatives. It was suggested that the probability distributions of end-products of the project appraisal, such as cost-benefit ratios that take forecasting errors into account, are feasible decision tools for economic evaluation. Political, social, environmental as well as economic and other related risk issues have been addressed and included in decision-making frameworks, such as in a multi-criteria decision-making framework. But no suggestion has been made on how to incorporate risk into the investment decision-making process.
Subject Investment and Risk Management
DOI - identifier 10.1016/S0739-8859(04)08010-2
Copyright notice © 2004 Elsevier Ltd. All rights reserved.
ISSN 0739-8859
Versions
Version Filter Type
Citation counts: Scopus Citation Count Cited 8 times in Scopus Article | Citations
Altmetric details:
Access Statistics: 171 Abstract Views  -  Detailed Statistics
Created: Mon, 06 Dec 2010, 11:15:00 EST by Catalyst Administrator
© 2014 RMIT Research Repository • Powered by Fez SoftwareContact us