ABSTRACT
Risk-payoff analysis is widely used to evaluate and prioritize information system projects based on their relative risks and their potential payoffs. Risk-payoff analysis is a useful tool for screening out projects that are associated with large risks or uncertainties, thus saving resources for more promising projects. Before performing a risk-payoff analysis, a given project must be understood in enough depth to reasonably estimate its likely risks, uncertainties, and payoffs. In some organizations, risk-payoff analysis is performed when the feasibility study reports for proposed projects are evaluated by a steering committee. Risks are possible negative outcomes that can be interpreted, estimated, or quantified by applying past experience. Technological change is perhaps the most obvious risk associated with developing an information system, but there are many others. The first step in the risk-payoff analysis process is to investigate the possible risks associated with each project and categorize them as tangible or intangible.
