An important factor in strategy formulation is looking how much risk a strategy might hold for the organization. Our authors Hunger &Wheelen (2013) describe; "Risk is composed not only of the probability that the strategy will be effective, but also of the amount of assets the corporation must allocate to that strategy; and the length of time the assets will be unavailable for other users" (p.114).
What is the Real Options Approach to evaluating Risk? How does that differ from NPV (Net Present Value)?
Hunger, J. D., &Wheelen, T. L., Hoffman, A. N., Bamford, C. E. (2015). Strategic Management and Business Policy (14th ed.). Upper Saddle River, NJ: Pearson Education.