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Factors Relevant to Business Case Risk:

 

A brief guide

 

Practical Project Risk Management

SERIES ARTICLE

By Martin Hopkinson

United Kingdom


Purpose

Ensure that the scope of the project’s risk management process is sufficiently broad to take into account all factors (costs and benefits) that are relevant to the project’s business case.

What factors should be taken into account by a project business case?

A project’s business case supports the decision as to whether or not the project should continue to be funded through its next phase. It does so by comparing the value of project benefits with the burden of continuing with the project’s delivery. Usually, the project will only be approved to continue if the business case demonstrates with sufficient confidence that benefits will exceed future costs. Risk to both costs and benefits must be included to make the comparison valid.

Since the business case supports a go/no decision it should take into account all costs and benefits that would be affected by the decision to be taken. Project-related costs and benefits that have already been realised should be excluded from the business case because they would be unaffected by the go/no go decision. Costs and benefits that would be realised regardless of the project’s continuance should be excluded on the same grounds.

Examples of Relevant and Irrelevant Costs and Benefits

  1. Costs already incurred should be excluded as being irrelevant unless they can be reversed.
  2. A project may have significant opportunity costs that should be included. For example, using land for a project might preclude the opportunity for the sale of land.
  3. Tax-related costs and benefits are relevant to the business that owns the project.
  4. All future project phases should be relevant, including the final phase of disposal.

Factors relevant to the business case often include some that are outside the project budget.

More…

To read entire article, click here

Editor’s note: This series of articles is by Martin Hopkinson, author of the books “The Project Risk Maturity Model” and “Net Present Value and Risk Modelling for Projects” and contributing author for Association for Project Management (APM) guides such as Directing Change and Sponsoring Change. These articles are based on a set of short risk management guides previously available on his company website, now retired. For an Introduction and context for this series, click here. Learn more about Martin Hopkinson in his author profile below.

How to cite this paper: Hopkinson, M. (2025). Factors Relevant to Business Case Risk: A brief guide, Practical Project Risk Management series, PM World Journal, Vol. XIV, Issue II, February. Available online at https://pmworldlibrary.net/wp-content/uploads/2025/01/pmwj149-Feb2025-Hopkinson-Relevant-Factors-for-Business-Case-Risk.pdf


About the Author


Martin Hopkinson

United Kingdom

 

Martin Hopkinson, recently retired as the Director of Risk Management Capability Limited in the UK, and has 30 years’ experience as a project manager and project risk management consultant. His experience has been gained across a wide variety of industries and engineering disciplines and includes multibillion-pound projects and programmes. He was the lead author on Tools and Techniques for the Association for Project Management’s (APM) guide to risk management (The PRAM Guide) and led the group that produced the APM guide Prioritising Project Risks.

Martin’s first book, The Project Risk Maturity Model, concerns the risk management process. His contributions to Association for Project Management (APM) guides such as Directing Change and Sponsoring Change reflect his belief in the importance of project governance and business case development.

In his second book Net Present Value and Risk Modelling for Projects he brought these subjects together by showing how NPV and risk modelling techniques can be used to optimise projects and support project approval decisions. (To learn more about the book, click here.)

To view other works by Martin Hopkinson, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/martin-hopkinson/