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CHAPTER 9 Managing Investments in Information Systems and Technology Strategic Planning for Information Systems John Ward ...
Outlines <ul><li>Evaluating IS/IT investments </li></ul><ul><li>Setting priorities for applications </li></ul><ul><li>Bene...
Evaluating IS/IT Investments <ul><li>Cooke and Parrish discovered that 70% of organizations had no formal justification an...
3 Types of Applications <ul><li>Substitutive – technology replacing with economics being the main driving force, to improv...
5 Basic Techniques for Evaluating Benefits <ul><li>Traditional cost-benefit analysis, which allows for efficiency improvem...
Cont… <ul><li>Value restructuring, which considers the productivity resulting from process and organizational change and c...
Relationship b/w Benefit types and the Application Portfolio Support Key operational High potential Strategic  Innovation...
Application Portfolio Approach <ul><li>It is simply not feasible to express all the benefits of systems in financial terms...
Portfolio Approach Suggestions <ul><li>Quantified, financial justification of applications is easier in the key operationa...
Cont… <ul><li>The way in which applications are planned and managed by the organization will also affect the way in which ...
Investment Justification
Support Applications <ul><li>Support application must show a good economic return for the allocation of a scare resource. ...
Key Operational Applications <ul><li>Financial benefits are not the only driving force. </li></ul><ul><li>Some benefits wi...
Strategic Applications <ul><li>Not estimates suitable for a discounted cash-flow calculation </li></ul><ul><li>Expressed a...
High Potential Applications <ul><li>It should be justified on the same basis an any other type of R&D, and preferably from...
Cont… <ul><li>Product champion is responsible for such projects, given a budget against agreed general terms of reference ...
Setting Priorities for Applications <ul><li>The mechanisms used to decide whether or not applications go ahead should also...
3 Factors for the Assessment of Priorities <ul><li>What is most important to do, based on the benefit identified. </li></u...
Setting Priorities in the Support Segment <ul><li>Setting priorities in the support segment should not be too difficult. <...
Setting Priorities in the Strategic Segment <ul><li>Give priority to those applications that will contribute most to achie...
Strategic Weighting via CSFs
Setting Priorities in the Key Operational Segment <ul><li>Arguments </li></ul><ul><ul><li>Financial </li></ul></ul><ul><ul...
Setting Priorities in the High Potential Segment <ul><li>If the idea potentially impacts many CSFs, it clearly stands out ...
Setting Priorities Across the Segments of the Portfolio <ul><li>The approach recommended for key operational applications ...
Effect on Weighting of Various Factors : Examples M L H H Environment is very competitive and business performance must be...
Cont… H H L L Technology cost performance enables lower costs for existing systems if redeveloped L M H M New systems are ...
Benefits Management <ul><li>A number of factors that differentiated success from failure were identified. </li></ul><ul><l...
Factors Increasing the Degrees of Success in SIS
The Context of Benefits Management <ul><li>Benefit Management: the process of organizing and managing such that potential ...
Cont… <ul><li>Based on the different objectives and rationale for the applications in each segment of the application port...
Generic Sources of Benefits for Different Applications
The Context of Benefits Management <ul><li>Inputs to the benefits management process </li></ul><ul><ul><li>Why is the inve...
Benefits Management Context
The Benefits Management Process <ul><li>Identification and structuring of benefits </li></ul><ul><li>Planning benefits rea...
A Process Model of Benefits Management
Identification and Structuring of Benefits <ul><li>The overall business rationale for a new or improved system will have b...
Cont… <ul><li>Identifying the target benefits implies an iterative process of establishing the investment objectives and t...
Cont… <ul><li>The benefits should be tested against the ‘benefit drivers’ in the organization (the business strategy), to ...
Planning Benefits Realization <ul><li>Determine the changes required for delivery of each benefit and how the IS/IT develo...
Benefits Dependency Network
2 Types of Changes <ul><li>Business changes  are those changes to working practices, processes and/or relationships that w...
Stakeholder Analysis  <ul><li>Stakeholder analysis is required to check the feasibility of achieving all the changes on th...
Stakeholder Analysis
Stakeholder Analysis <ul><li>Each stakeholder group is considered in terms of the extent to which they perceive the projec...
Benefits Dependency Network
Dimensions of Benefit Management
Presenting the Business Case Subjective assessments Objective measures How much
Stage 3: Executing the Benefits Plan <ul><li>To carry it out and adjust it as necessary, as issues arise affecting its ach...
Stage 4: Reviewing and Evaluating Results <ul><li>2 purposes of evaluation </li></ul><ul><ul><li>To maximize the benefits ...
Cont… <ul><li>Post implementation reviews tend to be held behind the closed doors of the IS function and are reviews of th...
Stage 5: Potential for Further Benefits <ul><li>Further benefits often become apparent only when the system has been runni...
Assessing and Managing Investment Risks : 5 Failure Domains <ul><li>Technical failure  – this is clearly the domain of IT,...
Cont… <ul><li>Organizational failure  – systems may satisfactory in meeting particular functional needs, but may fail beca...
Assessing and Managing Investment Risks <ul><li>Major investment failure is due to lack of understanding of the contextual...
Cont… <ul><li>The risks of each development need to be assessed in order to improve the chances of success, but management...
Cont…  Very risky Low risk Very risky
Assessing and Managing Investment Risks <ul><li>The assessment address the risk factors that are due to the nature and deg...
Potential Risk Factors <ul><li>Kind of change (A) </li></ul><ul><ul><li>Business impact </li></ul></ul><ul><ul><li>Degree ...
Potential Risk Factors <ul><ul><li>Level of dissatisfaction with the status quo </li></ul></ul><ul><ul><li>Strength of dri...
Potential Risk Factors <ul><li>Contextual change (D) </li></ul><ul><ul><li>Dependence of objectives on current commercial ...
Potential Risk Factors <ul><li>Any individual factor scoring 4 or 5 should cause relevant aspects of the project to be rev...
Potential Risk Factors:  Strategic Investment <ul><li>Score is highly in categories A and D </li></ul><ul><li>Action can b...
Potential Risk Factors:  Strategic Investment <ul><li>If the project scores highly in category C, but low in category B, c...
Potential Risk Factors:  Key Operational Investment <ul><li>Similar to the strategic projects, except that a high score in...
Potential Risk Factors:  Support Investment <ul><li>A high score in category A, C, or D suggests that the project is not s...
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Managing IS/IT Investments

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Managing IS/IT Investments

  1. 1. CHAPTER 9 Managing Investments in Information Systems and Technology Strategic Planning for Information Systems John Ward and Joe Peppard Third Edition
  2. 2. Outlines <ul><li>Evaluating IS/IT investments </li></ul><ul><li>Setting priorities for applications </li></ul><ul><li>Benefits management </li></ul><ul><li>The benefits management process </li></ul><ul><li>Assessing and managing investment risks </li></ul>
  3. 3. Evaluating IS/IT Investments <ul><li>Cooke and Parrish discovered that 70% of organizations had no formal justification and post-implementation review process for IS/IT investments </li></ul><ul><li>Farbey found that only 50% of IS/IT project were subject to formal preinvestment appraisal </li></ul><ul><li>In less than half the cases was a recognized financial analysis technique used, and in barely 30% was the outcome of the investment evaluated </li></ul>
  4. 4. 3 Types of Applications <ul><li>Substitutive – technology replacing with economics being the main driving force, to improve efficiency </li></ul><ul><li>Complementary – improving organizational productivity and employee effectiveness by enabling work to be performed in new ways </li></ul><ul><li>Innovative – achieving a competitive edge by changing trading practice, creating new market, etc. </li></ul>
  5. 5. 5 Basic Techniques for Evaluating Benefits <ul><li>Traditional cost-benefit analysis, which allows for efficiency improvements in organizational processes resulting from automation </li></ul><ul><li>Value linking, which estimates the improvement in business performance, not just saving made, from improving the linkages b/w processes or activities; or interactive component design with suppliers via a shared CAD system, to reduce the number of iterations needed </li></ul><ul><li>Value acceleration, which considers time dependence of benefits and costs in other departments of system improvements. This implies that benefits can occur in other parts of the business, not just where the system is actually implemented. </li></ul>
  6. 6. Cont… <ul><li>Value restructuring, which considers the productivity resulting from process and organizational change and change of job roles </li></ul><ul><li>Innovation evaluation attempts to estimate the value to the business of new business or new business practices levered from IS/IT </li></ul>
  7. 7. Relationship b/w Benefit types and the Application Portfolio Support Key operational High potential Strategic  Innovation evaluation   Value restructuring    Value acceleration    Value linking    Cost/Benefit Innovative (competitive) Complementary (effectiveness ) Substitutive (efficiency)
  8. 8. Application Portfolio Approach <ul><li>It is simply not feasible to express all the benefits of systems in financial terms </li></ul><ul><li>It is no useful purpose to develop spurious calculations to quantify the unquantifiable </li></ul><ul><li>The portfolio approach can offer help in making judgements </li></ul>
  9. 9. Portfolio Approach Suggestions <ul><li>Quantified, financial justification of applications is easier in the key operational and support quadrants, where most aspects of the application will be better known or can be determined, risks are lower and the rate of change is slower. </li></ul><ul><li>A singular approach to investment justification will tend to produce one type of application to the exclusion of others </li></ul><ul><ul><li>This argument is strong where a scare resource approach has been adopted and pure financial return on investment decides investment priorities - support applications will always be easier to justify financially </li></ul></ul>
  10. 10. Cont… <ul><li>The way in which applications are planned and managed by the organization will also affect the way in which they are justified – whether they are customer-related applications integral to achieving business objectives or systems intended to save major costs in one part of the organization </li></ul>
  11. 11. Investment Justification
  12. 12. Support Applications <ul><li>Support application must show a good economic return for the allocation of a scare resource. </li></ul><ul><li>If the project can be carried out within the user department’s control, then it is reasonable that the ‘go-no go’ decision is made by local user management </li></ul>
  13. 13. Key Operational Applications <ul><li>Financial benefits are not the only driving force. </li></ul><ul><li>Some benefits will be able to be related to CSFs, which provide a clear link of the investment to the achievement of business objectives. </li></ul><ul><li>‘ What will happen to the business if we do not invest in improving this key operational system?’ </li></ul><ul><li>‘ Can we afford the risk of not doing it? </li></ul><ul><li>Monopoly works best for key operational applications => central control </li></ul><ul><li>This enables a standard checklist of questions to be considered in the evaluation of any new project </li></ul>
  14. 14. Strategic Applications <ul><li>Not estimates suitable for a discounted cash-flow calculation </li></ul><ul><li>Expressed as the business opportunity that is being created or the CSFs that the application specifically addresses. </li></ul><ul><li>Application will get the ‘go-no go’ decision based on how directly it relates to the business objectives and particular strategies. </li></ul><ul><li>The benefits will drive from achieving those objectives by enabling the required business changes, not from the system alone. </li></ul>
  15. 15. High Potential Applications <ul><li>It should be justified on the same basis an any other type of R&D, and preferably from a general R&D budget rather than IS/IT funds. </li></ul><ul><li>High potential ideas tend to arise informally, based on individuals’ creative thinking, rather than from formal planning. </li></ul><ul><li>Many of ideas simply will not work and some control is essential to avoid significant waste of resources. </li></ul>
  16. 16. Cont… <ul><li>Product champion is responsible for such projects, given a budget against agreed general terms of reference to deliver results </li></ul><ul><li>When initial allocations are used up, further sums have to be justified based on the evidence of the possible benefits, not allocated in the vague hope of eventual success. </li></ul><ul><li>IS/IT investments should be considered just as objectively and just as subjectively as other business investments </li></ul>
  17. 17. Setting Priorities for Applications <ul><li>The mechanisms used to decide whether or not applications go ahead should also be used to set priorities across applications </li></ul><ul><li>Some priorities are logical, but many are largely independent of one another </li></ul><ul><li>Priorities need to be set in the short term to enable the best use of resources within the acquisition lead time for further resources </li></ul>
  18. 18. 3 Factors for the Assessment of Priorities <ul><li>What is most important to do, based on the benefit identified. </li></ul><ul><li>What is capable of being done, based on the resources available. </li></ul><ul><li>What is likely to succeed, based on the risks of failure of each investment </li></ul>
  19. 19. Setting Priorities in the Support Segment <ul><li>Setting priorities in the support segment should not be too difficult. </li></ul><ul><li>Those with the greatest economic benefit that use the least resources should get the highest priority. </li></ul>
  20. 20. Setting Priorities in the Strategic Segment <ul><li>Give priority to those applications that will contribute most to achieving business objectives, and use the least resources in the process. </li></ul>
  21. 21. Strategic Weighting via CSFs
  22. 22. Setting Priorities in the Key Operational Segment <ul><li>Arguments </li></ul><ul><ul><li>Financial </li></ul></ul><ul><ul><li>CSFs </li></ul></ul><ul><ul><li>Risk to current business </li></ul></ul><ul><ul><li>Infrastructure improvement </li></ul></ul><ul><li>Each of these benefits areas must be given some form of relative weighting based on the current business situation, to decide the preferred mix of benefit before looking at resource constraints </li></ul><ul><li>The costs and/or resources used by the project should be compared against its relative importance in each of the 4 categories to establish overall priorities </li></ul>
  23. 23. Setting Priorities in the High Potential Segment <ul><li>If the idea potentially impacts many CSFs, it clearly stands out from others and should be elevated above the general scramble for R&D type resources </li></ul>
  24. 24. Setting Priorities Across the Segments of the Portfolio <ul><li>The approach recommended for key operational applications can be extended to cover the whole portfolio. </li></ul><ul><li>Strategic applications will score heavily on CSFs, whereas support applications should deliver a good financial return. </li></ul><ul><li>Management must decide the weighting they wish to attribute to each type of benefit and then rank the systems. </li></ul>
  25. 25. Effect on Weighting of Various Factors : Examples M L H H Environment is very competitive and business performance must be improved L M H H Business is in a high-growth market and satisfying the market demand is paramount H L M L Business is in weak position or in decline – short-term profitability H L L L All types of investment have to be cost- justified to meet strict ROI hurdles Econo mics Infra structure Business Risks Objec tives/CSF Factors
  26. 26. Cont… H H L L Technology cost performance enables lower costs for existing systems if redeveloped L M H M New systems are required to support major business/organization change or rationalization M H H L Need for redevelopment of old systems. Systems and/or technology are out of date compared with competitors or peer organizations Econo mics Infra structure Business Risks Objec tives/CSF Factors
  27. 27. Benefits Management <ul><li>A number of factors that differentiated success from failure were identified. </li></ul><ul><li>While some were already well known, the successful investments were characterized by a deliberate, comprehensive approach to managing the benefit delivery. </li></ul><ul><li>In highly-successful projects, management treated the IT investment as a component of organizational change and were able to use existing change management processes to ensure the business maximized the value of the investment through associated changes to business practices </li></ul>
  28. 28. Factors Increasing the Degrees of Success in SIS
  29. 29. The Context of Benefits Management <ul><li>Benefit Management: the process of organizing and managing such that potential benefits arising from the use of IT are actually realized. </li></ul><ul><li>The ability to achieve benefits from a particular investment will depend largely on the organization’s experience and knowledge of what types of benefit IS/IT investments can or cannot deliver and how they can be obtained. </li></ul>
  30. 30. Cont… <ul><li>Based on the different objectives and rationale for the applications in each segment of the application portfolio, it can be seen that the mix of activities and their criticality to success will vary </li></ul>
  31. 31. Generic Sources of Benefits for Different Applications
  32. 32. The Context of Benefits Management <ul><li>Inputs to the benefits management process </li></ul><ul><ul><li>Why is the investment being made – what is causing the organization to change and how critical to its future is the successful management of the changes? (the benefit drivers) </li></ul></ul><ul><ul><li>What types of benefit is the organization expecting from the investment overall – to reduce costs, improve operational performance, gain new customer, etc.. </li></ul></ul><ul><ul><li>How will other activities, strategic initiatives, business developments or organizational issues affect the particular investment either to facilitate or inhibit its progress and outcome? (the organizational context) </li></ul></ul>
  33. 33. Benefits Management Context
  34. 34. The Benefits Management Process <ul><li>Identification and structuring of benefits </li></ul><ul><li>Planning benefits realization </li></ul><ul><li>Executing the benefits plan </li></ul><ul><li>Reviewing and evaluating results </li></ul><ul><li>Potential for further benefits </li></ul>
  35. 35. A Process Model of Benefits Management
  36. 36. Identification and Structuring of Benefits <ul><li>The overall business rationale for a new or improved system will have been identified </li></ul><ul><ul><li>The nature of the types of target benefit and </li></ul></ul><ul><ul><li>Extent of change involved to obtain them will depend on their impact and criticality for the business strategy which in turn determines whether the system is strategic, key operational or support </li></ul></ul><ul><ul><li>If the nature of the benefits and/or how to obtain them is unclear, then the system should be put through the R&D stage implied by the high potential segment until they are better known </li></ul></ul><ul><ul><li>The whole benefit management process does not really apply to the high potential segment </li></ul></ul>
  37. 37. Cont… <ul><li>Identifying the target benefits implies an iterative process of establishing the investment objectives and the potential business performance improvements that the system and associated changes should or could deliver. </li></ul><ul><li>The achievement of each objective could well deliver a variety of different benefits across the organization and also to trading partners and customers. </li></ul><ul><li>The process is iterative since objectives may be modified and new benefits identified as ideas and options are considered in the creative stage of discussion, or perhaps rejected after more careful scrutiny. </li></ul>
  38. 38. Cont… <ul><li>The benefits should be tested against the ‘benefit drivers’ in the organization (the business strategy), to ensure they are relevant and that investment to achieve them will be endorsed by senior management. </li></ul><ul><li>Every target benefit should be expressed in terms that can be measured, even if the measure will be subjective. </li></ul><ul><li>The final part is the determination of where in the business each benefit should occur and who in the organization should be responsible for its delivery. </li></ul>
  39. 39. Planning Benefits Realization <ul><li>Determine the changes required for delivery of each benefit and how the IS/IT development will enable the changes and benefits to occur => benefit dependency network . </li></ul><ul><li>The network relates the IS/IT functionality via the business and organizational changes to the benefit identified. </li></ul>
  40. 40. Benefits Dependency Network
  41. 41. 2 Types of Changes <ul><li>Business changes are those changes to working practices, processes and/or relationships that will cause the benefits to be delivered. </li></ul><ul><ul><li>They cannot normally be made until the new system is available for use and the necessary enabling changes have been made. </li></ul></ul><ul><li>Enabling changes are those changes that are prerequisites for making the business changes and/or are essential to bring the new system into effective operation. </li></ul><ul><ul><li>These often evolve defining and agreeing new working practices, redesigning processes, changes to job roles and responsibilities, new incentive or performance management schemes, training in new business skills, etc. </li></ul></ul><ul><ul><li>They can often made before the new system is introduced. </li></ul></ul>
  42. 42. Stakeholder Analysis <ul><li>Stakeholder analysis is required to check the feasibility of achieving all the changes on the network. </li></ul><ul><li>The purpose of the analysis is to understand those organizational factors that will affect the organization’s ability to achieve the required improvements. </li></ul>
  43. 43. Stakeholder Analysis
  44. 44. Stakeholder Analysis <ul><li>Each stakeholder group is considered in terms of the extent to which they perceive the project produces benefits for them, relative to the amount of change they will have to undergo or endure before they see the benefits. </li></ul>
  45. 45. Benefits Dependency Network
  46. 46. Dimensions of Benefit Management
  47. 47. Presenting the Business Case Subjective assessments Objective measures How much
  48. 48. Stage 3: Executing the Benefits Plan <ul><li>To carry it out and adjust it as necessary, as issues arise affecting its achievement. </li></ul><ul><li>Monitoring progress against the activities and deliverables of the benefits plan is just as important as for the IS/IT development plan. </li></ul><ul><li>It may be necessary to establish interim targets and measures to evaluate progress toward key milestones or the final implementation. </li></ul><ul><li>During this stage, further benefits may also be identified, and again the business project manager should decide on appropriate action to plan for the benefit or defer it until stage 5. </li></ul>
  49. 49. Stage 4: Reviewing and Evaluating Results <ul><li>2 purposes of evaluation </li></ul><ul><ul><li>To maximize the benefits of the particular investment </li></ul></ul><ul><ul><li>To learn how to improve benefits delivery from further investment. </li></ul></ul><ul><li>The results </li></ul><ul><ul><li>Provide explanations for the non-delivery of intended benefits </li></ul></ul><ul><ul><li>Provide knowledge to improve the management of future projects or system design. </li></ul></ul><ul><ul><li>Identify any unexpected benefits that have arisen and understand how they came about. </li></ul></ul>
  50. 50. Cont… <ul><li>Post implementation reviews tend to be held behind the closed doors of the IS function and are reviews of the implementation process rather than the investment outcome </li></ul>
  51. 51. Stage 5: Potential for Further Benefits <ul><li>Further benefits often become apparent only when the system has been running for some time and the associated business changes have been made. </li></ul><ul><li>IS/IT planning should be driven by the delivery of a benefit stream that improves business performance at the optimum manageable rate. </li></ul>
  52. 52. Assessing and Managing Investment Risks : 5 Failure Domains <ul><li>Technical failure – this is clearly the domain of IT, who are responsible for the technical quality of the system and the technology it uses. Technical failure is increasingly less common and is often the cheapest to overcome. </li></ul><ul><li>Data failure – this is a shared responsibility b/w IS/IT professionals and the users who input the data. </li></ul><ul><li>Use failure – while some blame for the users misunderstanding the system may accrue to the IS/IT professionals, the primary responsibility for ensuring users are trained to use the system appropriately </li></ul>
  53. 53. Cont… <ul><li>Organizational failure – systems may satisfactory in meeting particular functional needs, but may fail because they do not satisfy the organizational overall, due to inadequate understanding of how the system relates to the other processed and activities. </li></ul><ul><li>Failure in the business environment – the systems are or become inappropriate to external or internal business requirements due to changing business practices instigated by others, or by not supporting the business strategy adequately, or simply by not coping with the volume and speed of business process needs effectively or economically. </li></ul>
  54. 54. Assessing and Managing Investment Risks <ul><li>Major investment failure is due to lack of understanding of the contextual factors that produce project risks, or the inability to identify or address emergent issues that introduce risks of not achieving the required outcome. </li></ul><ul><li>The more strategic IS/IT investments become, the greater the consequence of failure and the more difficult it is to foresee and deal with the range of risks involved. </li></ul>
  55. 55. Cont… <ul><li>The risks of each development need to be assessed in order to improve the chances of success, but management need to understand the relative risks of all the developments in the portfolio in order to set sensible priorities. </li></ul>
  56. 56. Cont… Very risky Low risk Very risky
  57. 57. Assessing and Managing Investment Risks <ul><li>The assessment address the risk factors that are due to the nature and degree of change involved, as well as the organization’s ability to achieve those changes. </li></ul><ul><li>4 categories potential factors </li></ul><ul><ul><li>What kind of change will be involved? </li></ul></ul><ul><ul><li>How ready is the organization to accommodate the change? </li></ul></ul><ul><ul><li>How will the organization react to the change? </li></ul></ul><ul><ul><li>How dynamic is the context within which the change is to be effected? </li></ul></ul>
  58. 58. Potential Risk Factors <ul><li>Kind of change (A) </li></ul><ul><ul><li>Business impact </li></ul></ul><ul><ul><li>Degree of change </li></ul></ul><ul><ul><li>Pace of change </li></ul></ul><ul><ul><li>Technology innovation </li></ul></ul><ul><ul><li>Novelty of business solution </li></ul></ul><ul><ul><li>Clarity of vision of intended outcome </li></ul></ul><ul><li>Likely reaction (C ) </li></ul><ul><ul><li>Stakeholder commitment to benefits </li></ul></ul><ul><ul><li>Stakeholder willingness to change </li></ul></ul><ul><ul><li>Stakeholder willingness to contribute resources </li></ul></ul><ul><ul><li>Process and system interfaces </li></ul></ul>
  59. 59. Potential Risk Factors <ul><ul><li>Level of dissatisfaction with the status quo </li></ul></ul><ul><ul><li>Strength of drivers & constraints – balance </li></ul></ul><ul><ul><li>Business sense of ownership </li></ul></ul><ul><ul><li>Agreement on project objectives by key stakeholders </li></ul></ul><ul><ul><li>Senior management stance </li></ul></ul><ul><ul><li>History of success or failure- track record </li></ul></ul><ul><ul><li>Change management capability </li></ul></ul><ul><ul><li>Technology competency and experience </li></ul></ul><ul><ul><li>Project management competency and experience </li></ul></ul><ul><li>State of readiness (B) </li></ul>
  60. 60. Potential Risk Factors <ul><li>Contextual change (D) </li></ul><ul><ul><li>Dependence of objectives on current commercial environment </li></ul></ul><ul><ul><li>Susceptibility to regulatory and legislative changes during project </li></ul></ul><ul><ul><li>Dependence on current management structure </li></ul></ul><ul><ul><li>Dependence on other projects </li></ul></ul><ul><ul><li>Dependence on key personnel </li></ul></ul><ul><ul><li>Appropriateness of internal control mechanisms </li></ul></ul>
  61. 61. Potential Risk Factors <ul><li>Any individual factor scoring 4 or 5 should cause relevant aspects of the project to be reviewed in order to: </li></ul><ul><ul><li>Identify the possibility of changing its scope or the development approach to reduce the risk; or </li></ul></ul><ul><ul><li>Agree actions that can address the underlying cause(s) if the weakness; or </li></ul></ul><ul><ul><li>Establish appropriate contingencies to accommodate problems; or </li></ul></ul><ul><ul><li>Perhaps all three, in the case of a 5! </li></ul></ul><ul><li>If the average for any category is 4 or 5 or 50% or more of the category factors are 4 or 5, there is cause for considering whether the investment as intended will succeed. </li></ul>
  62. 62. Potential Risk Factors: Strategic Investment <ul><li>Score is highly in categories A and D </li></ul><ul><li>Action can be identified per high-risk factor </li></ul><ul><li>Actions should focus on reducing risk factors in B and C by reviewing the change components of the benefits dependence network to reduce the scale, severity or speed of change to make it more manageable </li></ul><ul><li>Some benefits may have to be forgone or postponed by accepting that not all the changes are achievable at present. </li></ul>
  63. 63. Potential Risk Factors: Strategic Investment <ul><li>If the project scores highly in category C, but low in category B, careful attention should be paid to particular stakeholders’ issues to reduce the potential resistence </li></ul>
  64. 64. Potential Risk Factors: Key Operational Investment <ul><li>Similar to the strategic projects, except that a high score in A is more serious. </li></ul><ul><li>Unless all other categories are low, the nature and scope of the proposed solution should be considered carefully, with the objective of finding a lower-risk, alternative way of delivering the set of benefits. </li></ul>
  65. 65. Potential Risk Factors: Support Investment <ul><li>A high score in category A, C, or D suggests that the project is not support! and its expected contribution should be reconsidered. </li></ul><ul><li>The main risk category is C and if this scores highly, it implies that essential changes will be resisted. </li></ul>

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