Half Sized Blog Element (Single Author Style)
Half Sized Blog Element (Multi Author Style)
Capital Part 5: Risk Assessment
The concept of a Risk Assessment is not new, however incorporating a few tools and concepts can strengthen the reliability of the assessment. With these tools, the assessment can be more thorough and consider circumstances that might otherwise be overlooked. The fourth criterion, Risk Assessment, is intentionally positioned last so useful data gained from examining […]
Capital Part 4: Organizational / System Impact
In an era of limited capital, and slowly recovering margins, organizations must exercise more caution and scrutiny than ever in deciding what will be funded. The changing landscapes of competition and consumer expectations can further complicate these decisions. In this series, we describe four types of criteria, and then some additional considerations, all designed to […]
The concept of a Risk Assessment is not new, however incorporating a few tools and concepts can strengthen the reliability of the assessment. With these tools, the assessment can be more thorough and consider circumstances that might otherwise be overlooked. The fourth criterion, Risk Assessment, is intentionally positioned last so useful data gained from examining the other three can inform the risks to be considered.
Some scenarios may relate to major trends (e.g. workforce shortage), while others stem from unique circumstances related to one or more of the requests (e.g. a competitor planning a similar investment). Use these as column headers in a matrix, with the various capital proposals as the row headers. Then, use symbols to indicate negative (-) or positive (+) impact that each scenario (column header) would likely have on each capital request (row header), keeping in mind that an empty cell (no impact) is also possible for any scenario/project combination. The completed table (see example at right) gives evaluators another way to compare the risk of the proposals.
In an era of limited capital, and slowly recovering margins, organizations must exercise more caution and scrutiny than ever in deciding what will be funded. The changing landscapes of competition and consumer expectations can further complicate these decisions. In this series, we describe four types of criteria, and then some additional considerations, all designed to to help you choose the projects most likely to succeed. In the previous two posts, we introduced the first two of four important criteria: Strategic Alignment and Financial Feasibility.
Like Strategic Alignment, the third criterion, Organizational / System Impact, is based on a broader, overall view of the organization. It could be seen as a derivative or hybrid of strategic and financial views. However, it can add some additional helpful perspectives in evaluating a capital investment.
Portfolio View: Will the investment maintain favorable share in a growing market (Star Quadrant) or possibly fuel growth by improving share in a growing market (Question Quadrant)? How do you maintain items still providing high return but pay attention to product or service life cycles? The answers can be found by understanding where the capital investment fits in the traditional portfolio view (see Diagram). However, also take stock of how all other current services would be positioned in the portfolio. Remember the best portfolio for achieving long term sustainability is one with investments balanced among the four quadrants. Your organization may be better served by a capital project fitting into an under-represented quadrant.