Risky projects

A company may be considering a project with a very high potential rate of return and a low risk, but it may prove impossible to raise the money to start the project. Conversely, the company may be prepared to undertake an extremely risky project if the investment is trivial. Thus, the attitude of a company to risk depends on the circumstances. 

Approval of a project requires the consent of many people, but a single "no" can cause the project to collapse. This mechanism has the potential of being misused by individuals to undermine projects they personally do not like. Risky projects (projects are by definition risky) are frequently surrounded by people who question the entire project by emphasizing one or the other inherent risk. If their concern has been recognized before and was considered during previous decisions, such criticism seems inappropriate and the critics should be requested to provide more constructive proposals. 

Companies that operate with risky projects identify VaR or similar measures directly with potential liability, and they would hold this amount of cash through the life of a project, or part of it. 

The discount rate should be equal to the actual rate of interest on long-term loans in the capital market or the average interest rate (cost of capital) paid by the borrower. The discount rate should basically reflect the opportunity cost of capital, which corresponds to the rate of return an investor would obtain if the funds were invested elsewhere with a similar level of risk. The discount rate therefore represents the minimum rate of return acceptable to the investor. When comparing alternative investmenis with different perceived risks, the discount rate can be increased for the more risky project investment so that a comparison can be made between the alternatives. 

When using NPV for decision making, there is a need to provide an appropriate discount rate and an accurate estimate of future operating cash flows. The discount rate is a rate that is assigned based on the risk of the project and the cost of capital. The risk of a project is related to the possibility that future cash flows will be less than anticipated. If a risky project is undertaken, there must be a higher reward for taking it on. The discount rate will be higher for riskier projects. Further, if the cost of capital is 10%, the project needs to at least earn that amount to ensure all investors earn a return commensurate with their risk. 

To assess the propensity of different types of agents to launch risky project, we report the cross-tabulation of the number of projects in classes Rl, R2 and R3 originated by the NBFs, the established pharmaceutical companies and the imiversities. Table 2 employs the sample of projects in which the developer is a US firm in the US. Since most of the NBFs are from the US, this ruled out potential biases due to international projects. For comparison. Table 3 reports the same data for the full sample. 

The main objection to the venture-premium method is that the assessment of the riskiness of a project may be too subjective. This could lead to the rejec tion of potentially attractive proposals and the acceptance of projects that merely appear to be risk-free. 

Objective, measurable criteria are always best, while subjective criteria are risky and subject to interpretation. There should be no room for doubt or ambiguity, although this is often difficult to achieve. It is also important to be clear about what the project output is expected to accomplish. For instance, these three outcomes may produce entirely different results the project/product performs the specified functions it was built according to approved design or it solves the client s problem. 

Two other measures that can be used to evaluate the profitability of a product are the return on investment and the payback period. The return on investment (ROZ) is the expected profit divided by the total capital invested, expressed as a percentage return. It must be clearly stated whether the profit is based on pre-tax or after-tax earnings. The after-tax ROI is compared with the earnings that could be achieved by an alternative investment, e.g. capital bonds. An after-tax ROI of at least 15-20% is usually expected (or 30-40% pre-tax ROI), assuming that the project is not particularly risky ... 

For the METREAU project it was chosen not to organise a proficiency testing with a drinking water to avoid a possible matrix gap with the matrix CRM. It is well known that, for the production of groundwater matrix CRM, it is difficult to choose a matrix sample representative of an average natural water. For water analyses, this is a major point to determine if a matrix CRM is appropriate. For the METREAU project, it would have been risky to get different matrixes since uncontrolled... 

The planning process as outlined below and in the example in Figures 1 and 2 represents a more strategic and goal oriented approach than the "experiment-after-experiment planning" method. It initially concentrates on the "what" (what is intended, what must be achieved) before the questions "how", "when" and "who" are addressed. As a consequence, the project is planned with a much wider perspective and tends to be less compromised by the many limitations that every researcher experiences during the daily work. The aim of one s research may be set wider or more ambitiously. Ambitious does not necessarily mean more risky, if potential collaborators are included in the considerations. 

Changes to the master plan should not affect the general aim of the project and, if possible, not affect or delay the overall time frame. Tasks or sections could be performed more in parallel where this appears justified and not too risky. Time buffers may be shortened or if... 

The implications of those safety requirements for urgently needed new adjuvants are significant. The adjuvant issue appears to be caught in a vicious circle. Risky vaccine projects cannot afford the extra risk and cost of an adjuvant development project, which could cost several million dollars. On the other hand, the success of several recombinant vaccines under development seems to depend on new and better adjuvants. The lack of clearly superior adjuvant candidates with reproducible effects aggravates this current situation. 

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