Investment Operating Model

Dynamic Resilience Return (DRR)

A next‑generation metric for corporate investment decisions that prices uncertainty, portfolio correlation, and resilience—so boards fund projects that win across multiple futures, not just one spreadsheet.

Read the Whitepaper

Legacy metrics are static

NPV/IRR assume one discount rate and a single expected future. Reality is a distribution of regimes and shocks.

No portfolio context

Project economics are judged in isolation. Correlation to existing assets and cashflow hedges are ignored.

Resilience is unpriced

Flexibility, option value, and survivability under stress rarely appear in the decision memo—so they’re under‑funded.

What DRR measures

Definition

Dynamic Resilience Return (DRR) answers a better question: How much robust value does this project generate across plausible futures, and how does it improve the resilience of the whole portfolio?

DRR_i = ( E[R_i] / σ_i^eff ) × Ω_i × ρ_i^*

E[R_i]: scenario‑weighted expected value
σ_i^eff: effective volatility across regimes
Ω_i: resilience factor (flexibility, survivability, option value)
ρ_i^*: marginal portfolio correlation multiplier

Boardroom logic

DRR prioritizes projects that add anti‑fragility to the enterprise: they earn well across scenarios, lower drawdowns when things break, and reduce dependency on any single risk driver.

Outcome: fewer write‑downs, stronger cashflow convexity, faster capital cycles.

How it works in practice

1) Scenario set

Define 6–10 plausible futures (prices, policy, tech, demand). Assign weights.

2) Expected value

Compute cashflow vectors per scenario; take the probability‑weighted expectation E[R].

3) Effective volatility

Blend dispersion across scenarios + regime shifts → σ^eff.

4) Resilience & correlation

Score Ω from design flexibility; compute marginal correlation ρ^* vs. current portfolio.

DRR quick calculator

Expected value E[R] (in €m)

Effective volatility σ^eff (0.05–0.60)

Resilience factor Ω (0.5–2.0)

Portfolio correlation ρ* (0.6–1.4)

DRR score

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Capital priority

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Rank vs. hurdle

Sensitivity

Ω↑, ρ*↓

Pull the two levers

Board‑ready interpretation

DRR > 450: Elite—capital accelerate, consider programmatic rollout.
250–450: Invest—fund with milestone gates and risk burn‑down plan.
< 250: Wait or redesign—raise Ω (flexibility), reduce ρ* (hedge/capacity mix).

Tip: Ω increases with multi‑market optionality, modular capex, and switchable inputs. ρ* drops with natural hedges and counter‑cyclical cashflows.

Board scorecard template

Project	E[R] (€m)	σ^eff	Ω	ρ*	DRR	Decision
Battery + Trading	130	0.22	1.6	0.78	—	—
Wind (merchant)	160	0.30	1.2	0.95	—	—
Geothermal (PPA)	115	0.14	1.5	0.72	—	—

Implementation in 30–90 days

30 days: Pilot

Scenario set, data hooks, Ω rubric, correlation calc; DRR for top‑10 pipeline projects.

60 days: Portfolio rollout

Capital allocation gates tied to DRR; board reporting; sensitivity heatmaps.

90 days: Operating standard

DRR embedded in stage‑gate, M&A screens, and annual plan; incentives aligned to resilience KPIs.

Executive FAQ

Is this just Sharpe Ratio rebranded?

No. Sharpe ignores portfolio correlation and real‑option resilience. DRR multiplies scenario‑robustness (Ω) and marginal correlation (ρ*) on top of a scenario‑weighted value/volatility core.

Can DRR replace NPV/IRR?

Use DRR as the primary capital ranking. Keep NPV for accounting and debt sizing. If DRR and NPV conflict, resilience risk is likely mispriced—investigate.

How do we score Ω objectively?

Define a rubric (fuel/market switchability, modularity, ramp agility, regulatory adaptability). Calibrate with back‑tests and stress events.

What drives ρ* lower?

Natural hedges (counter‑cyclical revenues), geography/market diversification, flexible dispatch, and contracts that decouple from existing risk factors.