In investing in a new venture, companies aim to increase their competitiveness and generate value in scenarios where volatile markets, geopolitical instabilities, and disruptive technologies create uncertainty and risk. The biobased industry poses additional challenges as it competes in a mature, highly efficient market, dominated by petroleum‐based companies, and faces significant feedstock availability and variability constraints, limited technological data, and uncertain market conditions for newly developed products. Thus, decision‐making strategies and processes for these investment projects must consider solid risk estimation and mitigation measures. Focusing on the biobased industrial sector, this paper critically reviews state‐of‐the‐art probabilistic and deterministic methodologies for assessing financial risk; discusses how a complete risk analysis should be performed; and addresses risk management, listing major risks and possible mitigation strategies. © 2017 Society of Chemical Industry and John Wiley & Sons, Ltd
The European Union’s Renewable Energy Directive has led many electricity producers in Europe to use wood pellets in place of fossil fuels. North America has become one of the primary suppliers of wood pellets to Europe. This paper critically examines literature, economic models and data, as well as the supply chain and country risk factors, related to wood pellet production to anticipate where North and South American pellet mills should be built to meet Europe’s demand. Canada, the United States, and Brazil maintain the largest natural forest area, planted forest area, and industrial roundwood production; however, South American countries achieve faster plantation growth rates. The World Bank’s Logistic Procurement Index and IHS’s Country Risk Index were used to score and rank countries’ investment climates, based on their supply chain and risk factors. In this regard, the United States, Canada, and Chile performed best, in contrast to Venezuela, Bolivia, and Ecuador. When considering both wood supply and investment climates, the United States, Canada, and Chile were the most attractive countries to build a pellet mill, while countries, such as Argentina, Brazil, Colombia, Paraguay, and Peru present significant trade-offs between having significant wood resources and riskier investment climates.
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