個案總覽

Originally published in the January/February 1964 issue of HBR, this article presents an innovative approach for calculating the risks entailed in projects such as modernizing a plant or launching new products. The technique determines a frequency distribution for each of the factors influencing the rate of return and focuses on specific combinations of variables. Computer runs and data comparisons are an inherent part of the analysis. This approach allows management to understand the nature of the data being used, and thereby results in wiser investment decisions. The retrospective commentary is an informative update on the subject of risk analysis.

Capital investment decisions are usually gambles based on little empirical information. An analysis of risk-based profiles determines which factors influence future costs and revenues and weighs them to develop an uncertainty profile. Each variable's estimates are placed on a probability distribution curve. A company's simulation reveals the range of possible outcomes for the individual criteria, such as ROI and payback. The simulation is a useful way for management to evaluate past investments and select new ones.