Take Actions to De-risk

Ricardo G Barcelona and Franz Heukamp

Chapter 6 in Dynamic Decisions:Energy PIVOT, Adaptive Moves, Winning BOUnCE, 2022, pp 295-355 from World Scientific Publishing Co. Pte. Ltd.

Abstract: De-risking energy investments imply two complementary facets: Avoiding losses from adverse events or profiting from better-than-expected outcomes. This managerial mindset reframes risk management. Under volatile markets, managerial flexibility is valued when prior commitments can be reversed affordably to avoid losses or to appropriate surplus. By employing value chain risk assessment, managers could have a granular and comprehensive view of specified risks and their underlying causes. As a result, risk-taking confers on managers the ability to structure specific commitments as creating options by adaptively managing their strategic and operational moves. Policy’s role is likewise reframed as one that facilitates capital flows as opposed to one that guarantees private payoffs.

Keywords: Energy; Energy Investments; Option Games; Real Options; Climate Finance; Sustainable Investment; Dynamic Decisions; Decision Uncertainties; Renewable Energy; Fossil Fuel; Carbon Tax; Energy Transition; Behavioural Economics; Political Economy; Financial Economics; Strategy and Competition (search for similar items in EconPapers)
JEL-codes: C58 G3 G30 O13 P48 Q43 Q5 (search for similar items in EconPapers)
Date: 2022
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