16 Red Flags To Look for in Business Cases

 

You’ve taken over a new project and you’re reviewing the business case. Or perhaps your sponsor has asked you to pick up a new project and you’re looking over the business case to see what you need to get started with.

In his book, Business Leadership for IT Projects, Gary Lloyd talks about the business case as a management tool. The book is of more value than just for IT projects, and I particularly like the ideas that the author provides when it comes to checking the validity and robustness of your project business case

Here are 16 red flags to look for in a business case. This is Gary’s bullet point list augmented by my take on what they mean for project managers.

1. Is the vision clear?

The vision is what people follow. If you aren’t clear about what the project is about in the business case, the people reading it won’t have a chance. It should be specific about the problem and what desirable end state is the result.

2. Is the scope unambiguous?

There’s always ambiguity at the start of a project, there has to be because you don’t yet know exactly how things are going to pan out.

However, points of ambiguity in a business case should be clearly pointed out, with risk budgets attached and plans about how clarity is going to be reached.

3. Have the key stakeholders been identified and engaged?

You might not want to do too much engagement prior to the business case being approved, but you definitely need people to know what is coming. If you are expecting them to work on the project in some way, they need to know that it is a possibility.

The red flag is when the stakeholder section in the business case looks skimpy. It should hold up to questioning: how much do these people know?

4. How was the cost saving or increased revenue calculated and tested?

The maths should be clear. A number alone isn’t going to give anyone confidence that all the variables have been taken into account. And if you can prove the numbers somehow because of desk-based research or a pilot or something else, then that should definitely be shown.

5. Is the worst case scenario really the worst case?

Is there a worst worse case? This is a good question to challenge a business case of a project that is mandatory or regulatory. Often those projects are started on the premise that ‘worst case’ is not being able to trade again, but that might not really be the situation.

You’ll also want to check what the worst case scenario is based on: if it isn’t to do with stopping trading if the project doesn’t happen, is the worst case to do with project costs, operating costs, missing out on cost savings, revenue or something else?

Dig into the facts and make sure your business case makes this really clear.

6. Does the project cost include contingency?

A no-brainer. If it isn’t there, ask where it is and be prepared to frown if the response is that the business case owner has padded all the estimates.

Contingency should be called out specifically for change budgets and risk budgets.

7. What is the change budget?

On the subject of change budgets, there is one, right?

8. What is the risk budget?

And the same for risk budgets!

9. Does the project cost include all of the non-IT costs?

This is relevant when there is a large IT element, or it’s an “IT project”. Training, temporary office space, staffing costs: they all mount up and might not be covered by the IT budget.

10. Does the NPV include all the operating costs?

See if the business case calculations include licences, infrastructure and staff costs as well.

Find out more about NPV in this video.

11. Is the discount rate visible?

And Gary adds: does it reflect the risk of the project? This might be defaulted into the calculations that sit behind the business case but you can at least check that they’ve used the standard calculations and didn’t feel the need to bespoke the maths in anyway.

12. What are the comparators that were used to calculate the discount rate?

Again, this is a good question but might be something set by the Finance team in the spreadsheets used for the business case template.

13. Is the time horizon used for NPV realistic?

 A high NPV is better and NPV generally is used to help show which project is more valuable to the organisation. That comparison is really only valid if you are all comparing projects over the same time horizon. Or if you aren’t, that it’s clearly different and realistic.

14. Are the performance criteria realistic?

Check that the performance criteria are something that you can sign up to. Is this what you thought you would be measured on and do you believe you can achieve it?

15. What risks are missing?

There’s nearly always something missing! That happens because you are a fresh pair of eyes and you’ve just combed through the business case looking for mistakes. There might be risks that jump out at you by their absence but you may also want to discuss the project business case with the team and check that the risks they raised made it into the document.

16. What key assumptions are missing?

And the same for assumptions. You may spot some because you are coming to the business case fresh, and ask the team what they had that perhaps didn’t make it to final version.