Importance of Business Case in Project Management

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Importance of Business Case in Project Management

Importance of Business Case in Project Management

A Business case is Management Product [As per PRINCE2] that provides
justification for undertaking a project, programme, or portfolio. The business case
provides information on ‘Why’ are we undertaking this specific project,
programme, or portfolio indicating or describing the ‘Purpose’ of undertaking it
and describing ‘How’ we shall be achieving the purpose outlined. The ‘How’ part
indicates various options and subsequently methods that will be opted for in
executing the project.
Who Prepares Business Cases?
As per PRINCE2, usually, the Business case is written or prepared by the Executive or
the Sponsor of the Project indicating Business view or Business aspirations
however, usually delegates its preparation to the designated Project Manager
however, its ownership remains with the executive or Sponsor of the Project
for arranging funding for the project. The sponsor owns the business case.
It brings together the investment appraisal with evidence of how the
investment is intended to lead to the realization of the intended benefits.

All projects must have a business case that demonstrates the value of the work
and it is outlined during the concept phase of the life cycle.

The Directing a Project process via Project Board covers the approval of the
Business Case.
Types of Business Case as per PRINCE2 – Outline Business Case vs detailed
Business Case

The outline Business Case is part of the Starting up a Project process.

The project Manager derives the outline Business Case from the project mandate
and then submits it to the Project Board for approval.

At this early stage, the costs and timescales will be estimated. If the project is approved, the outline
The business case is refined during the Initiating a Project phase. This detailed
Business Case uses the Project Plan and Risk Register along with the outline
Business Case.

With more detailed costs and timescales, the project could be
more or less viable. The project might therefore require replanning at this
point.

Contents of Business Case

     

      1. Executive Summary – Summarizing problem definition and proposed
        solution/approach with Benefits expected outlining Investment or cost of
        undertaking recommended approach/option

      1. Reasons for Undertaking Project – Why the project was considered in the
        first place—its context. The problem or situation that initially led the
        organization to consider doing this project; the project’s background.

      1. Project Execution Approach/Option – The possibilities that were considered
        in response to the problem statement (Reasons), and their anticipated
        results. Always includes “Do Nothing”, the minimum that could be done in
        response, and other possibilities. Indicate which option was selected (i.e.,
        this project), and why it was selected. In a typical IT project – various
        options that can be evaluated is Buy v/s Make v/s Hybrid meaning COTS v/s
        Bespoke v/s Heavy Customization

      1. Benefits – Benefits are the expected value to be delivered by the project,
        measurable whenever possible. Dis-benefits are negatives to the
        organization, and the project would want to minimize them.

      1. Timescale & Costs – Minimally, the time and costs to bring the project to its
        natural conclusion; would include intermediate figures that might impact
        project success. It may also include operational and maintenance costs to
        bring the outcome to the point at which the benefits will be realized.

      1. Major Risk and Opportunities of Undertaking Business Case – They could
        endanger (risks) or enhance (opportunities) the likelihood of the expected
        benefits being achieved. The weight of risks, the cost of mitigating them and
        the level of management’s risk tolerance could render a project not viable.

      1. Financial Appraisal – Value for money-ROI, Strategy, Break-even analysis
        and cash flow conventions

      1. The Benefits Review Plan [Optional]

    Why Business Case

    Every Project should have a Business case document. The reason for undertaking
    the preparation of the Business case is that it helps to determine – DAV –

    Desirable -Determines if this product/project is really needed. Compare the
    benefits against the dis-benefits.
    Achievable -Is it possible to deliver the benefit?
    Viable -Is it possible to do? Are we capable of delivering?

    Summary

    As stated above, every Project should have a business case thus enabling to
    justify execution of a project or initiating the project. The business case gets
    reviewed periodically to evaluate whether the project remains DAV – Desirable,
    Achievable and Viable. The Business Case can take a number of formats,
    including a document, spreadsheet, or presentation slides.

    FAQs

    Q1: What is the importance of a business case in project management?

    A1: A business case in project management serves as a documented justification for starting a project. It outlines the project’s objectives, expected benefits, risks, and financial considerations. It helps stakeholders understand the project’s value and feasibility.

    Q2: Who should be involved in creating a business case for a project?

    A2: Creating a business case requires input from various stakeholders, including project managers, sponsors, subject matter experts, and financial analysts. Collaboration ensures a comprehensive and well-informed case.

    Q3: How does a business case help in project decision-making?

    A3: A business case provides a structured basis for decision-making. It helps stakeholders assess whether the project aligns with organizational goals, whether it’s financially viable, and whether the expected benefits outweigh the costs.

    Q4: Can a business case be revised during the project’s lifecycle?

    A4: Yes, a business case should be dynamic. It can be revised to accommodate changing circumstances, new information, or shifts in project priorities. Regular updates help in maintaining project alignment with goals.

    Q5: What are the consequences of not having a well-defined business case in project management?

    A5: Without a clear business case, projects may lack direction, face uncertain funding, and struggle to gain stakeholder support. This can lead to project failures, wasted resources, and missed opportunities for the organization.

     

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