TABLE OF CONTENTS The computer press is littered with examples of information technology fiascos or near disasters. An example is the computer aided dispatch system introduced into the London Ambulance Service in 1992. The 1.5 million system was brought into full use at 07:00 hours on 26 October and almost immediately began to lose ambulances. During that and the next day less than 20% of ambulances reached their destinations within 15 minutes of being summoned, a very poor performance when compared with the 65% arriving within 15 minutes the previous May and the target set by the Government of 95%. The service reverted to semi-computerized methods during the afternoon of 27 October and then right back to manual methods on 4 November when the system locked up altogether and could not be re-booted successfully. (South West Thames Regional Health Authority, 1993)
Joyce Fortune and Geoff Peters, Learning from Failure: The Systems Approach (1995)
Risk analysis attempts to accommodate the inherent variability in the input estimates and produces a result that more closely reflects the level of uncertainty frequently experienced in the real world.
In situations where uncertainty is small, deterministic models can provide suitable solutions. It is more likely that uncertainty in the input variables, evidenced by their variability, is relatively high and therefore this should to be taken into consideration.
Specifying a probability distribution for each of the input variables such as investment, cash flows and cost of capital can capture this uncertainty. There are many candidate...
