This paper makes the case for adopting a risk measure from the finance sector for the evaluation of eBusiness projects and portfolios. The proposed value-at-risk method constitutes a well-tested approach in high-risk environments, especially banking, and reports the expected maximum loss (or worst loss) over a target horizon within a given confidence interval. Value-at-risk is computed using either an analytical, parametric approach, or resorting to simulation, either based on historical samples or Monte Carlo methods. In this paper, both the use for evaluating single e-Business projects and also associated portfolios is discussed. Small examples are given and assessed to illustrate both applications. The main advantages of using value-at-risk measures are that they are methodologically consistent with modern IS evaluation approaches like real options, that they offer possibilities for management and assessment of project portfolios, and that the results are easy to interpret.
Koch, Stefan, "Value-at-Risk for e-business Project and Portfolio Appraisal and Risk Management" (2005). ICEB 2005 Proceedings. 121.