Making A Financial & Business Case - Ch. 13 Flashcards
When should a business case be created?
A business case should be a living document, revised as the project proceeds and more is discovered about the proposed solution, costs and benefits as well as to ensure that changing circumstances have not invalidated it.
Broadly speaking it should be produced:
- After the feasibility study;
- After more detailed analysis work has been carried out;
- After the solution has been designed;
- Before the solution is deployed;
- Once the proposed solution has been in operation for a while (used for benefits realisation).
How would you go about developing options to put into a business case?
- Identify possible options (workshop/BAM/BPMN/study other organisations or competitors) for solving the business issue:
- business options (speed up call handling by 50%/reduce number of staff required to….)
- technical options (how solution will be implemented, often through IT)
- ‘do nothing’ (spell out risks and consequences)
- Shortlist options (reduce to 3 or 4)
- Evaluate shortlist
- Take options forward to business case
How would you assess project feasibility?
Check:
Business
- strategic fit
- can be achieved in the current market conditions
- will be delivered in sufficient time to achieve desired benefits
- fit with the management struture and culture of the organisation
- be capable of implementation within the phsyical infrastructure of the organisation
- process will be compatible with other areas of the business
- within the competencies of the organisation and its personnel, or plan for development
- meet regulatory and legal requirements
Technical
- Availability
- Reliability
- Maintainability
- Performance
- Security
- Scalability
- Technical Skills
- Compatibility
Financial
- Within budget
- funds available (or can be borrowed)
- Acceptable ROI
- Acceptable cash flow
- Fast enough payback
What techniques could you use to decide overall feasibility once all the options have been defined?
Force Field Analysis
Forces inside and outside the organisation that will support adoption of the proposal and those that will oppose it.
PESTLE
Political / Economic / Socio-cultural / Technological / Legal / Environmental
What is a standard structure for a business case?
- Introduction
- Management Summary
- What the study was about and what was found out
- Survey of options considered with pros and cons
- clear statement of recommendation
- Ideally 3 paragraphs but no more than 2 pages.
- Description of Current Situation
- Options
- Cost Benefit Analysis
- Long Term
- Intermediate
- Impact Assessment
- Risk Assessment
- Recommendations
- Appendices, with supporting information
What is the difference between tangible and intangible costs and benefits?
Tangible is something you can put a financial value on, such as a building or staff costs.
Intangible is somethig you cannot put a definite financial value on but that has an effect on the business, such as brand reputation or disruption and loss of productivity.
What should you do if you use ‘avoided costs’ as a benefit in a business case?
Always err on the conservative side.
How would you carry out Impact Assessment?
Check and document how the proposed change will/will not affect:
- organisation structure
- inderdepartmental relations
- working practices
- management style
- recruitmetn policy
- appraisal and promotion criteria
- supplier relations
How would you carry out a risk assessment?
Identify principal risks assosciated with the project and record:
- description
(cause and impact - e.g. uncertainty over the future leads to the resignation of key staff, leaving the organisation with a lack of experienced personnel’) - impact assessment
(scale of damage) - probability
(likilihood of damage) - Countermeasures
(Accept/Transfer/Mitigate) - Ownership
What is payback calculation?
A cash-flow forecast for the project. It does not take into account the ‘time value of money’.
- When do the benefits and costs break-even?
- When do the benefits outweight the costs?
What method would you use to take account of the time value of money in payback calculations?
Discounted Cash Flow (DCF), leading to a Net Present Value (NPV) for the project.
A management accountant would work out the discount rate to use in a discounted cash flow calculation.
What is an Internal Rate of Return (IRR)?
A cacluationt hat assesses what sort of return on investment (ROI) is represented by the project in terms of a single percentage figure.
It is often used to compare one project to another to identify the better investment opportunities and to compare them to what could be earned if the money was left in the bank.
The calculation used is DCF/NPV (Discounted Cash Flow divided by Net Present Value). Excel has a standard formlae to work this out.
What should you take into account when presenting a business case?
- The audience (perspective/seniority/business area)
Address the concerns of your audience. - Keep it short.
- Ensure the structure is fit for purpose
Use the company template if there is one, or the standard template if not.
For a face-to-face presentation: - tell them what you’re going to tell them
- tell them
- tell them what you’ve told them
- Think about appearances
Use lots of white space, pictures and diagrams instead of tables, colour.
For a face-to-face prsentation, avoid dozens of bullet-point slides - use pictures or colour.
What is Benefits Management and Realisation?
Managing projects so that they deliver the predicted benefits, and checking progress on the achievement of these benefits after the project has been implemented.
What process would you use for Benefits Management and Realisation?
- Create the business case.
- Identify the evaluation criteria you will use to measure benefits against objectives in the business case.
- Use the business case to measure progress towards delivery of benefits:
- during the change project
- for review benefits delivered after completion of project
- to identify further actions after completeion of project that will deliver missing or additional benefits
- Produce a benefits realisation report
