Risk Analysis

Risk analysis assures that the management team has a complete understanding of an SA. A risk is defined as an issue that may have a negative impact on the intrinsic value generated from a Strategic Alternative. This means identifying issues that have an effect on intrinsic value. The analysis entails identifying specific risks and ways to mitigate them. A risk template is the outcome of this analysis. The risk template gives you an overall risk assessment of a Strategic Alternative. This assessment is used to make quantitative adjustments in value. The risk analysis will provide the necessary information to adjust for risk through the cost of capital and some premium above the cost of capital if necessary. We will discuss fundamental risks that are prevalent with all strategic alternatives here. Risks can be put in the following categories:

• Recognition of benefits

• Timing

• Cost overruns