C9 Making a Financial Case

Question 1

What are the stages in the project lifecycle and how is the business case updated against the stages in the lifecycle?

Answer 1

1) Feasibility study - initial business case before major resources committed
2) Requirements analysis and specification - Business Case confirmed after detailed requirements.
3) Solution design - Business case confirmed once development costs estimated.
4) Solution development and implementation - Business case revisited before deployment.
5) Operation of new processes and systems. - Benefits realisation checked.

Question 2

The first step in putting together a business case is to identify and explore the various options that exist in solving the business issue. What are they?

Answer 2

Business options that explore what the proposed solution is intended to achieve in business terms.

Technical options - consider how the solution is to be implemented, often through the use of information technology.

Question 3

What problem solving approaches can be employed to uncover business options?

Answer 3

Brainstorming / Business Activity Modelling / Business Process Modelling

Question 4

What is the process for developing options?

Answer 4

Identify possible options -> Shortlist options -> Evaluate Shortlist -> Take options forward to business case

Question 5

What is a good number of shortlisted options?

Answer 5

Typically 3 or 4.

Question 6

When assessing project feasibility, there are three aspects to consider. What are these?

Answer 6

Business,
Technical,
Financial.

Question 7

What does the business aspect of project feasibility look at?

Answer 7

Strategic 'fit'
Market conditions
Timeliness
Enterprise Architecture
Organisational 'fit'
Cultural 'fit'
Within competencies 
Legality / Regulators
Management Structure / Culture

Question 8

What does the technical aspect of project feasibility look at?

Answer 8

Availability 
Reliability
Maintainability
Performance
Security
Scalability
Technical Skills
Compatibility
Proven 
Customisation (if COTS)

Question 9

What does the financial aspect of project feasibility look at?

Answer 9

Within budget
Funds available or can be borrowed
Acceptable Return on Investment
Acceptable cash-flow
Fast enough payback

Question 10

How can PESTLE help with assessing the feasibility of a project?

Answer 10

Political - is the proposed solution politically acceptable?
Economic - Can the organisation afford the solution?
Socio-Cultural - Does it fit with the organisations culture?
Technological - Cna the solution be achieved, technically?
Legal - Is it legal, will the regulator allow it?
Environmental - Does it raise any ‘green’ environmental issues?

Question 11

What is Force Field Analysis, and why is it used in assessing feasibility?

Answer 11

Lewin’s force field analysis is used to distinguish which factors within a situation or organisation drive a person towards or away from a desired state, and which oppose the driving forces.

These can be analysed in order to inform decisions that will make change more acceptable.

‘Forces’ are more than attitudes to change. Kurt Lewin was aware that there is a lot of emotion underlying people’s attitude to change.

Question 12

Describe the general structure of a business case?

Answer 12

• Introduction,
• Management Summary (written at the end),
• Description of the current situation,
• Options considered,
• Analysis of costs and benefits,
• Impact assessment,
• Risk Assessment,
• Recommendations,
• Appendices, with supporting information.

Question 13

What are the categories we could use when completing cost / benefits analysis?

Answer 13

Tangible costs (Development staff costs / User staff costs / Equipment / Infrastructure / Packaged software / Relocation / Staff training and retraining).

Intangible costs (Disruption and loss of productivity / Recruitment).

Tangible benefits (Staff savings / Reduced effort and improved speed of working / Faster responses to customers / Reduced accommodation costs / Reduced inventory / Other costs reductions).

Intangible benefits (Increased job satisfaction / Improved customer satisfaction / Better management information / Greater organisational flexibility / More problem solving time / Improved presentation or better market image / Better communications).

Question 14

We must explore the impacts that there might be on the organisation as part of the business case. What impacts might we consider?

Answer 14

Organisation structure - reorganisation required?

Interdepartmental solutions - service level agreements?

Working practises

Management Style - De-layering to give frontline staff more authority to deal with customers.

Recuitment Policy - What skills?

Appraisal and Promotion Criteria - changes to targets and incentives?

Supplier Relations - cooperative relationship is best.

Question 15

When completing a risk assessment, what areas should we look to document?

Answer 15

Description - also the impact.
Impact Assessment - scale of damage that could be a result,
Probability- how likely the risk will materialise,
Countermeasures - how to reduce / mitigate,
Ownership - senior managers responsible?

Question 16

What is the difference between Net Present Value and Payback?

Answer 16

NPV (Net Present Value) is calculated in terms of currency while Payback method refers to the period of time required for the return on an investment to repay the total initial investment. Payback, NPV and many other measurements form a number of solutions to evaluate project value.

Payback method, vs NPV method, has limitations for its use because it does not properly account for the time value of money, inflation, risk, financing or other important considerations. While NPV method considers time value and it gives a direct measure of the dollar benefit on a present value basis of the project to the firm’s shareholders. NPV is the best single measure of profitability.

Question 17

What is Internal Rate of Return?

Answer 17

Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero.

Question 18

There are key considerations to be made when presenting a business case. What are they?

Answer 18

-Think about the audience,
- Keep it short (clear and concise),
Consider the structure (tell ‘em what you’re going to tell ‘em, tell ‘em, tell ‘em you’ve told ‘em).

Question 19

What are the elements of a CARDI log (RAID + C)

Answer 19

Risks – events that can have an adverse impact if they occur.
Assumptions – things you assume are in place which contribute to the success of the project.
Issues – current matters that need to be considered and addressed by the group.
Dependencies – other projects or triggers that your project depends on, or are a beneficiary of your project outcomes.
Constraints - Think: Time / Cost / Quality.