Capital Project Appraisal

Question 1

Criteria to consider in initial appraisal

Answer 1

financial Results & associated Risks
Political constraints
sufficient Upside potential
Synergies with other projects
use of Scarce resources

Question 2

Project definition and scope

during detailed appraisal

Answer 2

Budget
Success criteria
Timescales
 (limits + expected time)
key Stakeholders
extent of team's Responsibilities

Question 3

Capital Project risk analysis

Answer 3

• preliminary High-level risk (serious risk) analysis
• Brainstorming session
• Desktop analysis
• risk Register

Question 4

Risk brainstorming process

Answer 4

-identify Spectrum of risks 
(upside + downside potential)
-consider Interdependencies
-broad initial evaluation of risks
(Frequency And Severity)
-generate initial Mitigation options

Question 5

Investment submission

Answer 5

• Financial information + results
• Identification + analysis of key residual risks
• Recommendations as to whether to proceed
• Mitigation strategy against risks identified in earlier analysis
• Proposed method of financing the project
• Effect on investors
• Non-monetary issues

Question 6

Intangible factors to consider in Capital Project

Answer 6

• Last-minute developments
• Allowance for bias/approximations
• kNowledge not in the possession of those who prepared the submission
• Doubts over project’s feasibility
• Hunch
• Overall project credibility

Question 7

Evaluation process of Risk Mitigation options

Answer 7

• Overall impact on NPVs
• Feasibility and cost.
• Further mitigation required for secondary risks (R)
• Effect on frequency, severity, correlation
• resulting secondary Risks