Business case

• Defined
  • Purpose
  • Business Case defined
  • Outputs, outcomes and benefits
  • Types of Business Case
• Approach
  • Overview
  • Developing the Business Case
  • Verifying and maintaining the Business Case
  • Confirming the benefits
• Approach - The contents
  • Typically contains
  • Reasons
  • Business options
  • Expected benefits
  • Timescale
  • Costs
  • Investment appraisal
  • Major risks
• Responsibilities

Key sections

• Introduction
• Business case
• Organization
• Quality
• Plans
• Risk
• Change
• Progress
• Introduction to processes
• Starting up a projectDirecting a project
• Initiating a project
• Controlling a stage
• Managing Product Delivery
• Managing a Stage Boundary
• Closing a Project
• Tailoring PRINCE2 to the project environment
• Directing Projects with PRINCE2

The PRINCE2® approach

The contents

Investment appraisal

With the information in the Business Case, it is possible and necessary to compare the development, operations and maintenance costs with the value of the benefits over a period of time (often referred to as an investment appraisal).
The investment appraisal period may be a fixed number of years or the useful life of the products.
The commissioning authority may have prescribed accounting rules defining how the investment will be appraised.

The investment appraisal should cover both the project costs (to produce the required products and the project management costs) and the ongoing operations and maintenance costs.
For example, the estimated costs for office relocation could cover the project costs for the relocation activities, new stationery costs, penalties for terminating service agreements on the current premises, and the increase in rent/rates and service costs for the new premises.

Investment appraisal techniques include:

Through-life costs

Analysing the total cost of implementation and any incremental operations and maintenance costs

Net benefits

Analysing the total value of the benefits less the cost of implementation and ongoing operation calculated over a defined period

Return on investment (ROI)

Profits or savings resulting from investments (this is the same as net benefits if the benefits were only financial)

Payback period

Calculating the period of time required for the ROI to ‘repay’ the sum of the original investment

Discounted cash flow

A means of expressing future benefits based on the current value of money.
Sometimes discounted cash flows include risk adjustments as the business may not be confident that all the benefits will materialize.

Net present value

The total value of discounted future cash inflows less the initial investment.
For example, if inflation is at 6%, the value of money halves approximately every 12 years.
If a project is forecasting a £500,000 benefit to materialize in year 12, then it is only worth £250,000 in today’s money

Sensitivity analysis

Business Cases are based on uncertain forecasts.
In order to identify how robust the Business Case is, it is useful to understand the relationship between input factors (e.g. project costs, timescale, quality, scope, project risk) and output (e.g. operations and maintenance costs, business benefits and business risk).
Sensitivity analysis involves tweaking the input factors to model the point at which the output factors no longer justify the investment.
For example, the project is worthwhile if it can be done in four months, but ceases to be worthwhile if it were to take six months.

PRINCE2® is a Registered Trade Mark of the Office of Government Commerce in the United Kingdom and other countries.