Economic risk analysis for sustainable urban development: validation of framework and decision support technique

Sustainable urban development requires detailed assessment of economic, environmental and social impacts borne by major stakeholders. A framework to address these complex issues underpinning sustainable urban development is proposed to aid decision making in the face of uncertainties. An analytical approach is developed as a tool to assist decision makers by using an engineering approach, risk-based cost-benefit analysis model that encompasses concepts from “Life Cycle Costing”, “Engineering Reliability Analysis” and “Risk Management”. It aims to rank design options based on model outputs, such as rate of return, probability of loss and value at risk. This study presents the logic of this approach and tests the framework using a synthetic project formulated around the economic perspective of an investor in considering the implementation of various desalination plant technologies. Two alternative desalination plants were evaluated based on a collective of project information, and the results showed that the model output provided a clear indication of the preferred option using risk-based metrics.