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Value Realisation

Once the business case has received approval and project development commences, processes are put into place that ensure that costs, benefits and risks materialise as planned. These processes continue throughout the life cycle of the project to provide the project sponsor and steering committee with the assurance that the project is on track to achieve its objectives within the parameters specified in the business case. By implementing a project value realisation approach, management is able to make informed decisions about continuing to support the project, modifying the project scope, or disbanding it.

VALUE REALISATION PHASES

The concept of project value realisation can be supported by a generic approach that is well-known in IT project management. It is aptly named the Active Benefits Realisation (ABR) approach, developed by Remenyi et al. (1997) to achieve a net return from an IT project investment. Being of a generic nature, organisations can adapt its design and principles to suit their project risk management and governance activities.

ABR processes are conducted in several phases. They commence with the construction and approval of the business case before moving to the project development phase. Data is continuously collected on the costs that are being incurred, the benefits that have emerged and how project risks impacted on them. Actual data is compared to the estimates in the business case and changes to the project are considered should there be discrepancies. By a system of tradeoffs between time, costs, benefits and risks, the decision is made to continue the project as is, amend the business case, terminate the project or propose a future project. The value realisation processes are evaluated jointly by the project's stakeholders, i.e. the project sponsor, project manager and steering committee. A conceptual overview of the project value realisation phases is shown in Figure 4.4.

Conceptual model of project value realisation

Figure 4.4 Conceptual model of project value realisation

VALUE REALISATION PRINCIPLES

ABR is guided by a number of principles which can be applied to PRG. ABR suggests the staged execution of various project processes (e.g. planning and commencement) and commitment to outcomes that will provide business benefits rather than technical solutions. PRG complies with these principles in that risk management at the project level is done in stages (planning, identification, analyses, response and control) and project risk strategies aim to achieve positive business outcomes.

The approach is comprehensive and includes the opinions of all major- stakeholders. Through this, all those affected by the project are fully committed to the realisation of project benefits. PRG similarly uses a governance structure that builds relationships between members of the board and steering committee, the project sponsor and the project manager. They support the objective of PRG: to implement project risk strategies that protect and add value.

ABR is focused on a full range of benefits, both tangible and intangible. It recognises that some benefits have a direct effect on the organisation's profitability (tangible) while others have a positive effect on the business but are not able to be quantified financially (intangible). PRG applies value- creating and value-protecting strategies that have both tangible and intangible outcomes, as outlined previously.

Value realisation is most effective when it is performed regularly, preferably continuously. ABR includes summative evaluations, in which the financial impact of the new project is determined, as well as formative evaluations which are akin to learning processes. Under PRG, the organisation manages its project investments through the business case (containing 'sums' that quantify costs and benefits) and project value realisation to continuously monitor and respond to changes that occur. 'Lessons learned' captured at the completion of the project ensure that experiences are carried forward to future projects.

The objectives of value realisation are achieved through a full discussion of co-evolving requirements. ABR recommends that project benefits be realised through building relationships between stakeholders leading to a common understanding of the continuous changes that businesses and projects undergo. PRG not only applies investment management and value realisation processes, but also structures and relational mechanisms that tie together a wide range of stakeholders.

Checklist: Project Risk Governance in Project Value Delivery

• Does the organisation follow a project value realisation methodology?

• Are value realisation processes conducted in stages, viz. preparation of business case, project development and project closure?

• Are all major stakeholders involved in realising project values?

• Is the progress in value realisation continuously reviewed?

• Is data collected to provide evidence of incurred project costs and benefits and the impact of project risks?

• Are deviations from business case estimates evaluated against the criteria of costs, benefits, time and risks?

• Are decisions made to respond to deviations from estimates, viz. amend business case, terminate or disband the project?

• Do steering committees consider all requests to amend or close a project?

• Do all projects have clearly defined outcomes?

• Are completed projects reviewed for their successful outcomes, including the performance of project risk management?

 
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