Think of an example of a real option for managing information risk that you observed in practice or your own life. Remember that real options are designed to protect against the negative impacts of some information risk. Please answer the questions below.
Please describe what the option is, what information risk it is mitigating, who can use the option, and who offers it. For example, Essmart customers have the option to return products they dislike. This option is offered by Essmart and mitigates the risk customers have regarding product quality and usefulness.
How does this option address the information risk you mentioned above? Is the risk shifted to someone else, or does it simply disappear? For example, when Essmart offers customers a return option, the quality and fit-risk are transferred from the customer to Essmart. Conversely, the option to put the Circored plant on "standby" eliminates the downside of price risk.
What are the operating expenses and assets associated with this option? For example, in Essmart's case, offering customers a return option has costs and assets associated with reversing logistics and refurbishing the returned product.
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