Laying foundations and building upon them to realise project benefits
During the process of starting a project, the Business Case must be prepared. It is then refined during the process of initiating a project. In this article, you’ll learn how a Business Case is developed within the PRINCE2 framework.
What does a Business Case do?
There are several questions that the Business Case must answer:
- The reason for the project
- The advantages/benefits it will produce
- The project risks
- The costs involved
Five foundations to developing the Business Case
There are five foundations to developing the Business Case:
1. Project mandate
This is given by the project executive, describing project scope, any preconditions for the project to start, and how the project relates to other projects underway or planned.
2. Project background
The project background describes why the project is necessary – the background that has determined that the project should be evaluated. For example, this might detail customer demand, new regulations, or new best practice processes.
3. Project scope
The project scope describes what, who, and how the project affects. A well-defined project scope should help to avoid scope creep (the addition of extra requirements), and describes the breadth and depth of the project.
4. Risk analysis
This is analysis of the risk to the organisation or its business should the project not go ahead, is delivered late, over budget, or does not produce the outcome expected of it. The risks may include operational and supplier side. The risk analysis should also include possible measures that can be taken to minimise those risks that have been identified.
5. Cost benefit analysis
This step describes the costs and benefits of the project, though the analysis to get to these conclusions is not included.
How the Business Case is structured
The Business Case should be structured in such a way that it takes the reader logically to a conclusion. It always starts with an executive summary and concludes with risks.
· Executive summary
An outline of the Business Case, highlighting the major benefits and expected ROI.
Describing the reasons for the project, and how it will help achieve business goals.
An explanation and analysis of the options open to the business – namely to do: nothing; the minimum; the maximum.
· Forecast benefits
A description of the expected benefits to be produced by the project, conveyed in measurable terms against the current state of affairs (before and after the project). There should be tolerances for each benefit and their sum.
· Project negatives
Any outcomes perceived as negatives should also be described – these are not risks, but certainties. For example, a merger of two departments may have cost and efficiency benefits, but may also lead to redundancies and reduced productivity while the departments are being merged.
How long the project will last, and when the benefits will be realised.
· Project costs
Summarising the costs involved with the project, including how they will be funded.
· Investment appraisal
A comparison of benefits and negatives, and ongoing costs to business operations, in order to put the Business Case as a viable investment. You might expect to use: cash flows; ROI; rate of returns; payback period; etc.
This is a description of the major risks associated with the project, and how they may be mitigated.
Finally, it is imperative that the Business Case and Project Plan are aligned, working to the same goals and also aligned with the aims and objectives of the business strategy.
Contact Your Project Manager for extra advice: