The Arthur D. Little project in the energy & utilities sector presents a practical approach for risk-based decision-making. The approach uses the Monte Carlo method to thoroughly evaluate the risk in business cases, allowing businesses to reduce their downside potential and maximize outcomes. Despite the complexity of today's business environment, most decisions are made based on single numeric metrics such as NPV and IRR, which offer simple calculations but may neglect underlying risks. The Monte Carlo method provides a way to include risk in decision-making by evaluating multiple scenarios using different assumptions. This approach can be crucial for final decisions, as it allows for a more comprehensive evaluation of potential outcomes.
