PRINCE2 Business Case
The Content and Structure of a PRINCE2 Business Case
Let’s now look at the contents of a PRINCE2 business case, reminding ourselves that in tailoring PRINCE2 to the project environment, this list that I’m going to take you through would need to be tailored as appropriate to the nature size complexity and so on of this project and hence business case to the organization.
Executive Summary
Fairly straightforward, starting with an executive summary listing key points such as important benefits and possibly a headline return on investment statement.
The reasons why the project is needed and how it will enable the achievement of corporate strategies and objectives.
You’ll remember of course that the project board executive is responsible for ensuring that the project remains aligned with such strategies and objectives.
Business Reasons
Now the reasons for the project are often mis-stated.
It’s important to understand that PRINCE2 goes to great pains to say that the reasons should explain the problem to be solved and/or an opportunity to be gained.
Very often reasons get confused with benefits – for example the reason why we are implementing a new customer helpdesk is to improve customer relationships and to respond more quickly to their questions, whereas the benefits might well be an increased revenue stream.
Business Options
This is an analysis and reasoned recommendation for the business options and would normally include an option of do nothing do minimum or do something.
Put less cryptically that do nothing would act as the starting point.
You see if you’re looking at a business case which is compelling it needs to clearly articulate what the difference would be if it didn’t exist. So, do nothing gives you a baseline reference.
Do-nothing might show for example profit figures for the next 12 months if this project were not to be implemented.
Do the minimum might be a short quick easy cheap low-risk whatever option and another option might be something else perhaps a more elegant perhaps a more expensive one, yet giving more benefits.
What we’re looking at here is making the decision about which one of these options is best and it provides the answer to the question:
“for this level of investment are the anticipated benefits more desirable, viable and achievable than the other options” which we’ve identified as being available.
Whichever the chosen option is, it should continue to be assessed for desirability viability and achievability throughout the project particularly at the end of each stage as new risks arise, we want to still make sure that we’ve chosen the best option.
Now as I introduce the next section in a business case I want to remind you that the project approach is how you’re going to deliver the project business options.
Expected Benefits
What you’re going to do now next is the expected benefits now.
These are the positive ones, a list of each benefit including its quantifiable current status. In other words, what is it as a baseline reference point.
Now benefits can be financial or non-financial, but they must always align with corporate objectives and strategy. What’s the point of running a project if it’s not pointing in the direction that your business is?
Expected benefits should map from the project outputs – that’s the products and the outcomes, like the diagram I showed you at the beginning of this session.
It must be quantified with tolerances, in other words expected benefits would have a plus or minus range of tolerances within which the business case would still be viable desirable and achievable.
Each benefit must be measurable and assigned. What we mean by that is the area if you will, where the benefit will be felt either in a department or product line or something else and must include any benefit realization requirements.
We are going to come to the Benefits Management Approach shortly so these are positive benefits.
The project should not include any products that do not directly or indirectly enable benefit realization. Now that really is a headline statement it’s very easy, particularly when planning and being influenced by senior stakeholders to bolt-on if you will, extra products.
The litmus test should always be: “does this product contribute directly or indirectly to the benefits laid out in the business case”
Wherever possible, benefits should be expressed in tangible ways.
Why?
Because they’re more easily measured and proven.
The quantification of benefits enables benefit tolerance to be set, as I said, plus or minus whatever the benefit metric is and the measurability of the benefits ensures that they can be proven.
Let’s continue now with the contents of the business case.
We did benefits in the previous slide, this is where we do the same for disbenefits, which is defined as “outcomes perceived as negative by one or more stakeholders”
A disbenefit is an anticipated consequence as a result of the project outcome, and should not be confused with a risk.
For example, having a centralized help desk may mean as I said earlier, that you have some redundancies, some retraining, or it may simply be that you’ve lost critical mass in different regions because you’ve centralized the help team in one geographical place.
What you would want to do with dis benefits is acknowledge them, but manage them to minimize them.
You can see now, that a business case that only mentions benefits but deliberately doesn’t include dis benefits would be an unbalanced and frankly a slightly dishonest business case.
The value of including dis benefits is we can see the whole picture and therefore enable the project board, ultimately of course the project board executive, to make an informed choice.
Timescale
Now the project timescale and the benefit realization period should be both included here. This is why when we’ll come to the initiating a project process, we’ll see that the project plan is normally developed first and then followed by refining the business case, to develop the detailed business case.
The reason is of course, is we need the timescale aspects of the project plan.
It should show the project costs time-period, the start to finish duration if you will, of the project the cost benefit analysis period.
I’ll show that in a minute, it’s the time scale during which benefits will be analyzed and realized, when their benefits will accrue the key time periods.
Notice I’m using plural here it could be that a project only has one benefit but normally benefits are more than one, and different benefits may come on stream at different points.
So the timeframe is important.
The earliest and latest feasible start date and ditto for the finish date.
So remember, the input
s you use from the project plan to the business case of a project time scale.
You’ll also want the benefit realization period, similarly with costs.
Again the summarized project plan costs including any cost based assumptions that were made. But this is not just the project plan costs, it’s also the costs for ongoing operations and maintenance cost, and where their funding is to come from.
Investment Appraisal
The next piece is called the investment appraisal. Now this compares the aggregated, summarized if you will, benefits, and those dis benefits against the costs within the project the budget.
These of course are extracted directly from the project plan plus also ongoing incremental operations and maintenance costs.
Going back to my example of a helpdesk, you could well see that although the project plan would contain the costs of implementation, once it’s been used, there will be extra expense.
For example in terms of staff costs, because of the 24 hour service that is now being offered, the new helpdesk may be more technically challenging or use different forms of technology and functionality – and therefore maintenance costs may also be increased.
Now, the term investment appraisal is a general one and may use many different types of numeric techniques.
We’ve just looked at cost-benefit analysis, but please be aware there are others as well. I only list them here for general information, as you would not be expected to describe these in any detail for the PRINCE2 exams.
But for example, return on investment is one which you may have heard already or establishing the length of time before your project costs are covered by revenue income. This is called the payback period.
As you know, we’ve discussed net present value.
Another example might be internal rate of return. Okay, so there’s many different types.
What is important, is that the business case should have some form of investment appraisal and this will be updated throughout the life of the project – particularly at the end of each stage.
The objective here is to establish that the business case remains viable, also of course, that it is desirable and remains achievable.
Risks
The next section are the risks and I’ve included here a diagram which we’ll cover when we look at the risk theme within PRINCE2.
It’s called a summary risk profile, and it’s a graph if you will, a scatter diagram to be more precise where the vertical axis is calibrated in probability from very high, high, medium, low, and very low.
The horizontal axis shows impact of each individual risk from very low to very high, and these numbers here relate from the risk register reference indicating the number of each unique risk.
For example risk number nine has been identified as very highly, likely to happen and if it does happen, it will have a very high impact.
Whereas, to take risk number six it’s not very likely to happen very low probability, and even if it did happen, its impact would be low.
In this way, we can get an understanding for a scatter diagram type of approach of where the most severe risks are.
The most severe risks are of course, by virtue of the scales are shown top right.
So, this is a summary diagram of the aggregated risks using the summary risk profile. These risks may either reduce or enhance the benefits.
Again, when we cover the risk theme, we’ll learn that they are negative threats – the normal type associated with the word risk
But we also have positive opportunities.
So these aggregated risks will either reduce or enhance the benefits or reduce or increase the costs again depending on whether it’s a threat or an opportunity.
Be aware for now, that the total content of all of a project’s risks are held on the risk register but here in the business case we’re showing the major risks that if they occurred would have an effect on the business objectives and benefits.
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