Abstract
This paper discusses the application of real options analysis for a project that is in the process of construction and was affected by a natural disaster. The use of the analytical method has become a way of thinking in making decisions that should be taught to business school students. The case in this paper is based on an MBA thesis at the University of Gadjah Mada that was intended as a showcase for application of real options to address real business problems. It shows one of the strategies in mainstreaming disaster risk management in the business school that also answers the needs of businesses in the disaster-prone country.
Highlights
Indonesia is an archipelago country with a population of more than 230 million people, lying on the equator with more than 17,000 islands, and a part of pacific ring of fire with many active volcanos (129)
The speakers were academicians or economists, and professionals in the financial industry. One such speaker was from AXA Financials who explained about risk management of new financial instruments and a new asset class in emerging markets, which includes the transmission of economic turmoil in Euro economies on emerging market economies such as Indonesia
Master of Management, Universitas Gadjah Mada (MMUGM) will continue its initiatives in developing business cases based on real problems using Indonesian setting
Summary
Indonesia is an archipelago country with a population of more than 230 million people, lying on the equator with more than 17,000 (seventeen thousands) islands, and a part of pacific ring of fire with many active volcanos (129) These geographical, geological, hydrological, and demographical characteristics make Indonesia one of the countries most vulnerable to natural disasters such as earthquake, tsunami, volcano eruption, tornado, floods, draughts, wildfire, landslide, etc. It indicates that floods are the most frequent disaster (31.4%), followed by tornados (20.7%), landslides (16.7%), wildfire (12.6%), and draughts (8.9%), with the rest including terrorism, earthquakes, tsunamis, climate change, volcano eruptions, famine, disease outbreaks, etc. All of these disasters undoubtedly cause a vast amount of economic losses, affecting the continuity of businesses and people’s welfare
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