What is PRINCE2?

What is PRINCE2?

PRINCE2 courses

PRINCE2 theme: Business Case

The purpose of this theme is to establish mechanisms whereby the (ongoing) desirability, viability and achievability of the project can be assessed in a reliable way. This is achieved through a management product called the Business Case. The Business Case is the key document which allows the Project Board to clarify and, where possible, quantify, the estimated costs, risks and expected benefits of the project.

The Business Case is developed firstly in outline form when starting up the project, is then refined in more detail during the initiation stage, and is updated at the end of each subsequent stage except the final stage. It is the key document which will enable the Project Board to decide if the project remains worthwhile investing in.

The Business Case consists of several sections:

Executive summary – this section highlights the key points of the document and the ROI (return on investment) expected.

Reasons – (reasons for undertaking the project). This section describes why the project is needed i.e. the business problem being faced, or the business opportunity which has arisen. Senior management need to be certain that the reasons for the project have been adequately reviewed, and not simply decided on a whim.

Business options - the three basic options when considering a potential project are: do nothing; do the minimum; do something. The do nothing option is the one option which, if preferable to all other options, means that the project is not viable. In this case, there isn’t a project to invest in, and the organization can continue with the existing business as usual activities.

The ‘do the minimum’/’do something’ options represent potential projects each with their own costs, times, benefits and risks. The Business Case should analyze each option, so that that the project stakeholders can determine which presents the best investment for the organization.

This section should present a reasoned argument about why one option is the preferred option (e.g. it will deliver the best return on investment). It is this option which will form the basis for the project. The information in the following sections of the Business Case shall then be based upon the assumption that this is the chosen option.

Expected benefits – there may be many different kinds of benefits resulting from a project. For example, investing in new machinery might bring benefits in terms of greater productivity and lower maintenance costs. Investment in training may realize benefits in the form of greater staff productivity. Some benefits may not be easy to quantify. For example, if a hospital invests in new equipment may bring improvements in patient care, which would be an obvious benefit to the patient, but the financial benefits may be harder to quantify.

Where possible, benefits should be made measurable (e.g. the percentage increase in sales), to enable an informed judgment about the value of a project.

Expected dis-benefits - a dis-benefit is an actual consequence of a project which is perceived to be negative by one or more stakeholders (e.g. a drop in productivity whilst the project is ongoing). Dis-benefits are not the same as risks. Risks are uncertain events that may or may not occur whereas dis-benefits are actual consequences. Dis-benefits should be analyzed as part of the investment appraisal (see a later section), to ensure that they do not outweigh the expected benefits of the project.

Timescale – there are two timescales which are of interest. Firstly the timescale over which the project will run and secondly, the period over which the benefits will be realized. This usually equates to the timescale over which the project’s products will be operated and used.

Cost - there are two costs which are of interest. Firstly, the costs of the project, and secondly, any ongoing operations and maintenance costs. In both cases, the funding arrangements should be identified i.e. from which corporate budget are they being paid.

Investment appraisal – this section contains a comparison of the aggregated benefits and dis-benefits against the risks and costs of the project along with any ongoing operational or maintenance costs. The objective of the investment appraisal is to assess the value of the project as an investment.

Major risks – this section contains a summary of any major risks associated with the project, including an evaluation of their likely impact, and plans for dealing with their occurrence. These risks are taken into consideration by the Project Board when deciding whether to proceed with the project both when the project is starting up and also at the end of each management stage. If the project is deemed as too risky, then the Project Board may of course decide that it isn’t sensible to proceed.

At the end of the project, a post-project benefits review is normally performed to confirm whether the benefits outlined in the Business Case have been realized. A Benefits Review Plan is developed by the Project Manager during the project’s initiation stage, and is submitted to the Project Board for approval. This plan contains an outline of how the benefits will be measured, by whom and when. At the end of each stage, it is updated with any benefits actually achieved during the stage. At the end of the project it is updated with revised plans for the remaining reviews.

Sample Business Case

If you are looking for an example of a Business Case then you can take a look at this one which is taken from a PRINCE2 eLearning course developed by Knowledge Train. You will also be able to receive business case templates and examples by attending our 1 day course on writing and presenting compelling business cases