Towards an assessment of resilience in telecom infrastructure projects using real options

DS 87-2 Proceedings of the 21st International Conference on Engineering Design (ICED 17) Vol 2: Design Processes, Design Organisation and Management, Vancouver, Canada, 21-25.08.2017

Year: 2017
Editor: Anja Maier, Stanko Škec, Harrison Kim, Michael Kokkolaras, Josef Oehmen, Georges Fadel, Filippo Salustri, Mike Van der Loos
Author: Mak, Jonathan; Cassidy, Steve; Clarkson, P. John
Series: ICED
Institution: 1: University of Cambridge, United Kingdom; 2: BT Research Labs, United Kingdom
Section: Design Processes, Design Organisation and Management
Page(s): 487-496


This paper employs the concept of real options to quantitatively assess resilience. First, the definitions of resilience are distilled from literature in the fields of engineering, management and ecology to give requirements for further assessment. From this, it was found that resilience requires a system to be robust, adaptable and flexible in the face of uncertainty. The main contribution of the paper is to connect these requirements to real options valuation and demonstrate the evaluation of the robust and flexible cases through real options methods. Specifically, Least Squares Monte Carlo method is used to value each option with the robust case being the benchmark and flexibility representing upgrades to the system. This is applied to an illustrative telecommunications case and the properties of the model assessed. The results show that uncertainties on the system can be captured and valued through this method so that it can aid a decision maker to assess which technology option or investment to select for future planning.

Keywords: Large-scale engineering systems, Uncertainty, Design management, Resilience


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