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2019 | OriginalPaper | Chapter

9. Anticipating the Future: Managing Risk and Real Options

Author : David W. Stewart

Published in: Financial Dimensions of Marketing Decisions

Publisher: Springer International Publishing

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Abstract

The future is not certain. There are risks and opportunities that may impact the outcomes of the best-laid plans. This chapter describes how the models, tools, and techniques developed for the case of certainty can be adapted to address more realistic situations in which marketing planning occurs under uncertainty. The chapter presents and evaluates techniques that firms use to incorporate risk into their budgeting processes and financial planning with a specific emphasis on how risk is evaluated in a financial context. The chapter also addresses the means by which firms may leverage existing marketing assets or real options.

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Footnotes
1
Other factors may be important in some industries. For example, among natural resource companies there may be uncertainties related to exploration for mineral deposits.
 
2
While beyond the scope of this chapter, it is also worth noting that other benefits accrue to financially healthy, lower risk organizations, including numerous tax advantages related to depreciation, tax credits, and interestexpense write-offs.
 
3
A fourth approach, calculating certainty equivalents for the cash flows, is found in the finance literature but exists largely as a theory without a practical means for implementation.
 
Literature
Booz, Allen and Hamilton. (1982). New Product Management for the 1980s. Booz, Allen and Hamilton Inc.: New York.
Montibeller, G., & von Winterfeldt, D. (2015). Cognitive and Motivational Biases in Decision and Risk Analysis. Risk Analysis, 35(7), 1230–1251.CrossRef
Musashi, K. (2016). The 25 Cognitive Biases:Understanding Human Psychology, Decision Making & How to Not Fall Victim to Them. CreateSpace Independent Publishing Platform/ Virtual Publisher.
Metadata
Title
Anticipating the Future: Managing Risk and Real Options
Author
David W. Stewart
Copyright Year
2019
Publisher
Springer International Publishing
Book
Financial Dimensions of Marketing Decisions

Print ISBN: 978-3-030-15564-3

Electronic ISBN: 978-3-030-15565-0

Copyright Year: 2019

DOI
https://doi.org/10.1007/978-3-030-15565-0_9