Abstract
In this study, we used a combined stochastic process and value-at-risk (VaR) method to examine an electronic commerce expansion decision. By modeling uncertain benefits as a stochastic process, maximum losses of alternative decisions were quantified and compared to help managers to make information system/information technology (IS/IT) project decisions. Our results, based on the maximum loss perspective, demonstrated that uncertainty plays a critical role in evaluating IS/IT projects. More importantly, the results illustrate that VaR serves as a useful tool in decision-making for managers to quantify the value of maximum possible loss and to help them reach decisions.
Highlights
Information technology (IT) is a course of action that collects, stores, processes, and transmits data [1]
Value at risk (VaR), which originated from the insurance and banking field and stresses the maximum possible loss under uncertainty, has gained an increasing amount of attention in recent years from academics and practitioners such as the Basel Capital Accord for managing uncertainty in the banking industry
We employed the VaR in a real-world case of the Yankee 24 bank e-commerce service expansion decision
Summary
Information technology (IT) is a course of action that collects, stores, processes, and transmits data [1]. Given the importance of IT investments, managers are keen to justify large IT expenses and to oversee one of the most risky decisions for organizations [5]. Value at risk (VaR), which originated from the insurance and banking field and stresses the maximum possible loss under uncertainty, has gained an increasing amount of attention in recent years from academics and practitioners such as the Basel Capital Accord for managing uncertainty in the banking industry. How can one design a formal evaluation framework for future studies and for practitioners to apply VaR in the IS/IT field?. Leveraging the two fields can support academics and practitioners alike. For. Entropy 2020, 22, 47 practitioners, knowing how to use different perspectives to re-examine maximum loss under uncertainty can support top managers and help organizations improve appraisal decisions for the successful introduction of new technologies and, gain competitiveness
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