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Question 2

Using real options in a risk environment can be beneficial if

the enterprise need to make decisions on switching or acquiring multiple suppliers. Ericsson and Nokia had different approaches in managing risk, which led to different outcomes during a business interruption event at a major supplier.

a. Explain the difference between risk and uncertainty. (5 Marks)

b. Explain how real options how can be used to inform decisions to reduce the impact of exogenous shocks on the enterprise. (25 Marks)

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