Investment decisions are normally done under large uncertainty. These uncertainties appear at different points in time, and often differ in nature, involving technical or economical elements, the market, credit, performance and more. Assessing the total value, risk and robustness of the investment is the objective of DNV’s value chain assessment.

Purpose

To make a value chain assessment of the technical and economical attractiveness of an investment to support business-critical investment decisions.

Benefits

The value chain approach allows all relevant uncertainties along the value chain to be included. Thus it provides a more accurate description of the total risk. Furthermore, the major risk drivers and their underlying causes and knock-on effects can be analysed.

Value chain assessment is specifically designed for studies of:

• Entirety approach (total uncertainty – upside and downside)
• Integrated technical-economic studies
• Concept selection
• Flexibility and robustness of different concepts or investment alternatives
• Cost-benefit assessment of new technology
• Value of new information
• Valuations of real options.
  

Our approach

Assessing the total value and uncertainty – and thus the total risk – of an investment is the main objective of DNV’s value chain assessment. Our approach is different from the traditional discounted cash flow approach, which integrates all risks into the discount rate. Instead, we model the uncertainties into cash flow elements, such as costs, availability, schedule, etc. This adds to the understanding of the impact of risk drivers, and offers a better starting point for managing those risks in the investment project that typically follow the investment.

This approach does not replace detailed analyses. Rather, it provides a way to aggregate data with the uncertainty that arises from the disciplines. In this way the approach handles different levels of detail.

Typical services include:

• Net-present value assessments
• Concept selection
• Flexibility and robustness of different concepts or investment alternatives
• Cost-benefit assessment of new technology
• Value of new information and real options.