Title

Total Risk Evaluation for Capital Budgeting- Roundtable Discussion

Department/School

Finance

Date of this version

3-2011

Document Type

Article

Keywords

total risk, systematic and non-systematic risk, evaluation of risk for capital intensive projects

Abstract

This special session addresses a timely topic -- the evaluation and management of total risk for long-term capital intensive projects. Total risk is composed of two sets of risks, systematic and non-systematic. Systematic risks cannot be eliminated and are non-diversifiable. They are generated by market conditions, including globalization of production processes, outsourcing, supply chains and the requirements of servicing diverse clienteles. The non-systematic risks can sometimes be managed through diversification. They are usually specific to the project and/or the company. However, there are projects in sectors such as energy, transportation, infrastructure, health, education, and science and technology where diversification is often not an option. Projects in these sectors, imperative in all parts of the world and with some urgency in the BRIC countries, have to consider total risk.

Published in

Journal of Applied Finance

Citation/Other Information

  • Vol 21 (1), 2011
  • Jaiswal-Dale A., “Total Risk Evaluation for Capital Budgeting in the Oil and Gas Industry: A Clinical Study of the BTC Project”, Academy of International Business-South East (AIB-SE) – Annual Meeting, Jacksonville, US, October 2009.
  • 2010 Financial Management Association International European Meeting held in Hamburg, Germany, June 10, 2010