The Financial Risk of Not Staffing Your Project Right From the Early Stages

I was recently asked to facilitate a Lessons Learned/Risk workshop for a multi-billion-dollar investment that failed to advance to the execution phase. The company’s executive management team wanted to know why they had received a recommendation to move forward. They invested a significant amount of funds, but the project had not met the thresholds to obtain the decision gate approval. One of the first questions that came up was about the budget and human resources approved to conduct this analysis. The team consisted of two geoscientists, 3.5 facilities engineers, and a small team of financial analysts, who had received all the estimates (production profiles, cost, schedule, etc.) at the end to calculate the NPV, IRR, CAPEX, OPEX and present a recommendation to the management team. The size of the team was the first red flag.

The next question was related to the development of the business case, assumptions, risk analysis, interfaces, and integration of the multidisciplinary efforts. As soon as this question was raised, it became evident that this was the missing piece of such a complex puzzle. All these activities were conducted by resources with no experience with these types of efforts, with no access to the proper project management tools and with no liability for the plan. In their own words, they were only “technical resources”. It was quickly determined that the plan was oversimplified, optimistic, and lacked the proper integration and risk assessment. The subsequent question was: How come no project development resources had been assigned? The answer was truly short “We did not see the need for those resources until the prospect became a real project”.

It has been proven repeatedly, that if you do not involve the proper skilled resources from the early strategic planning and control phase of a multi-billion-dollar project, companies will not be able to deliver the financial benefits the investors are promised. The underestimation of project interfaces and complexities will have a direct impact on the outcome of your project. You must document and assess all your assumptions throughout the capital management & decision process, in order to have a better chance to analyze your financial investment constantly and effectively, including the technical, safety, regulatory and commercial aspects involved.

At the end of the workshop, one of the main business recommendations was to secure funding for a strong and complementary multidisciplinary team that can assure efficient governance compliance and the quality control required to walk the projects through the gate process, providing the appropriate tools for the team and management to make educated decisions. If the focus of your efforts, time and resources is the financial outcome of the project without a vetted project execution plan that provides the stakeholders with transparency and visibility of the risks and opportunities, you might end up with erroneous readings on your financial analysis and recommendations, which will make you waste time and resources in unworthy projects and miss out on good opportunities. Investing in the right experience increases your chances of success and will translate into savings in the end.

#projectmanagement #businessadvice #management #leadership #success #interfaces #financialawareness