Por: Manuel Viera Flores, Ceo & Managing Partner, Metaproject.

Abstract

A real case is presented on how to handle and calculate risk and its potential for a correct decision making, determining the appetite and tolerance to risk in investment decisions. The methodology developed consists of showing a strategy on how to apply the risk policy in a company through a decision heuristic, where the probability of success and probability of failure of a project are combined, together with the cost of uncertainty, the cost of irrationality, confidence interval and the value at risk, all based on a decision under high risk and uncertainty. 

The lesson learned is that at least three technical-economic valuation methodologies must be applied before making a decision.

Probability distribution function curves with @RISK software and a real case of an iron ore EPCM project in Chile are shown.