What happens when quantum computing re-defines the assessment of investment risk?
Mark Laybourn A B and John Pascoe AA Accenture, Level 3, 5 Mill Street, Perth WA 6000, Australia.
B Corresponding author. Email: mark.laybourn@accenture.com
The APPEA Journal 57(2) 486-488 https://doi.org/10.1071/AJ16140
Accepted: 6 April 2017 Published: 29 May 2017
Abstract
The dawn of quantum computing is upon us and as the world’s smartest minds determine how the technology will change our daily lives, we consider how it could benefit investors in oil and gas projects to make better decisions.
The oil and gas industry relies on investment for its survival and investors expect a return commensurate with the risks of a project. The classical approach to investment evaluation relies on mathematics in which estimated project cash flows are assessed against a cost of capital and an upfront investment. The issue with this approach is the key assumptions which underpin the project cash flow calculations such as reserves, production and market prices are themselves estimates which each introduce a degree of risk.
If we analysed the financial models of recent oil and gas developments we would find the key assumptions which underpin the projects would be vastly different to reality. The crystal ball of investment evaluation would benefit from a more powerful way to optimise estimates and assess risk.
A quantum computer offers the ability to perform optimisation calculations not possible with classical computers. The theoretical ability to run infinite parallel processes (as opposed to sequential processes in classical computers) can fundamentally change the optimisation of estimates. Google and NASA were recently able to solve a highly specialised computing problem with a quantum computer 100 million times faster than a classical computer. The power to significantly improve estimation optimisations and thereby reduce risk will help investors achieve a higher degree of confidence and should see levels of investment increase.
Keywords: binary architecture, bits, cash flow forecasting, classical computing, deep learning, estimates, estimation techniques, future cash flows, investment, logic, machine learning, oil and gas, optimisation, probabilistic estimation, quantum computing, quantum entanglement, qubits, rate of return, risk, sequential processing, superposition.
Mark Laybourn is a chartered accountant with over 14 years of experience in corporate finance, accounting and audit working with major corporations and mid-sized companies in the resources, energy and technology sectors. Mark is a leader of the Accenture Finance and Enterprise Performance team in Australia and has significant experience in helping companies solve complex business challenges to achieve high performance. Prior to joining Accenture, Mark was the Chief Financial Officer of an ASX-listed blockchain technology company with operations in the United States, Australia and Iceland. Mark was instrumental in driving the companies listing on the ASX and subsequent design and setup of its finance organisation. Mark has also worked with Deloitte in Corporate Finance and Advisory and Euroz Securities developing extensive experience in all aspects of corporate finance, accounting, equity capital markets, mergers and acquisitions, asset valuation and due diligence. Mark holds a Bachelor of Commerce (Accounting and Information Systems) from Curtin University, a Graduate Diploma of Chartered Accounting from Chartered Accountants ANZ, a Graduate Diploma of Applied Finance and Investment from Kaplan Professional and is completing a Master of Business Administration specialising in Leadership with the University of Western Australia. Mark is a member of Chartered Accountants ANZ. |
John Pascoe is a strategist, management accountant and IT technologist with over 14 years of experience in finance operations, digital performance management and service design/delivery working with major corporations and mid-sized companies in the energy (oil and gas upstream), mining and utilities sectors. John is the lead of the Accenture Finance and Enterprise Performance team in Australia and has significant experience in helping companies solve complex business challenges launching new digital service offerings to achieve high performance. John has led several key transformation programs of work across Accenture clients involving the latest disruptive technologies and new service delivery models. Prior to joining Accenture, John led the modernisation of a revenue and customs agency. John was instrumental in driving the introduction of electronic filing and risk profiling, launching a large business service centre for listed corporate tax payers as well as non-intrusive imaged based inspection techniques for containerised exports. John holds a Bachelor of Business Science (Strategic Management and Information Systems) from Rhodes University and a Higher Diploma of Tax Law from Johannesburg University. |
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