What is a critical investment case?

By our understanding, significant investment cases share common properties. It shall be of use to describe some of these properties:

The investment is unusual in the sense of it not being done routinely. It is unknown terrain for the investor/s.
Success or failure of the investment has a crucial impact on the financial future of the investor/s. Risks must be managed in an active and effective manner.
The market value of the considered project does not yet reflect the value of the expected cash flows.
The investment generates uncertain cash flows over a long period of time.
The investment generates uncertain cash flows in various currencies.
The investment is very uncertain. This can be due to the market-, negotiation-, political-, makro-, valuation- and/or liquidity-risk.
When quantified, the investment is a combination of capital market risk, macroeconomic risks and direct project risk. (Learn more about how we define risk here)
The core uncertainty is not driven by single events.
In its core, the investment is of private nature and not a capital market investment. The investor has control over it.

In reality, an investments may or may not have all the properties mentioned above. The judgment about whether these properties are present or not is subjective and up for the investor to decide.

But if you think that you are confronted with investments having some of the above properties, we would strongly recommend to perform a stochastic analysis of the investment case.

We do taylor our services to your needs. See the article “Considering a risky project?” for possible scenarios.

Please do not hesitate to contact us for further discussions or if you have questions.