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The BCBOK® Framework: HOW DOES IT WORK?





             If business cases project results into the        Period (period required to pay the investment);
         future, then they involve uncertainty. For this       External  Rate  of  Return;  NPV  (Net  Present

         reason,  we  highly  recommend  doing  a              Value).
         sensitivity analysis for both benefits and costs           In  addition  to  the  benefits  and  costs
         estimation to examine sensitivity (behaviour)         previously  calculated,  another  metric  will
         of  results  (predicted  value)  to  changing         impact  the  final  performance  results:  The
         assumptions  and  measure  uncertainty.               Interest rate (the discount rate). The Interest

             An  explicit  assumption  definition  will         Rate will be used to update the future cash-
         enable  the  business  case  author  to  propose      flows to the current year, and it is composed of
         the best scenario, maximizing benefits.                the investor/company capital opportunity cost

             The final decision should always be based          as well as the annual inflation rate. Regarding
         on the conservative scenario to create more           the  risk,  if  there  are  no  market-financial
         a w a r e n e s s   a n d   a v o i d   u n e x p e c t e d   references,  the  sensitivity  analysis  will
         discrepancies  such  as  a  negative  Return  on      generate the project" uncertainty". One of the
         Investment.                                           most popular and reliable techniques is called
                                                               Monte Carlo Simulation. A software simulation

              STEP  5 | Economic Evaluation                    completes  a  process  of  changing  all
                                                               assumptions and recording the output value
                    Refer to page 117 of BCBOK  V1.1
                                           ®
                                                               repeated  thousands  of  times  until  a  picture
                                                               emerges  showing  the  full  range  of  possible
                                                               outputs  and  their  probabilities  together  with
                                                               the weight/contribution of each assumption to

                                                               the output result.
                                                                   A  sensitivity  and  risk  analysis  is  also
             The economic evaluation aims to evaluate
         if the initiative is economically attractive to the   extremely  useful  in  providing  information  to
                                                               management  to  maximize  results,  reduce
         organization.
                                                               costs  and  minimize  uncertainty  in  the
             The  primary  business  case  performance         projected  business  case  outputs,  helping  to
         measure is the Return on Investment (ROI), as         recommend the best action.
         it expresses the initiative profitability ratio and
         quantifies  the  evidence  of  added  value.           TRIGER  | GO or NO GO

         According to the ROI Methodology, the goal is
         to get a positive ROI (Return on Investment).             After collecting the economic and financial
         For this reason, within a portfolio of initiatives,   data and its analysis, one must decide whether
         the  ones  with  the  best  ROI  should  be           the business case should take the next step. If the
         prioritized. When the estimated ROI is higher         conclusion is that it will not create value for the

         than  50%,  the  project  should  go  ahead.  In      organization, it should be a "No-Go" decision.
         addition to this analysis, other relevant metrics
         should also be considered, such as Payback





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