A balance sheet for projects
a guide to risk-based value--part 1
A project delivers value to its investors within a prescribed limit of risk. This article describes a way of obtaining this prescribed level of risk at the outset of the project. From management's top-down view, projects are investments. However, project managers estimate projects from the bottom up, using detailed implementation knowledge. The variance between management's expectations and the project team's implementation capability is a basic source of risk. A project balance sheet may be created which displays the value proposition of the project on the left, and the quality and cost-schedule-performance estimates on the right. Risk is the independent variable, and is added to the right to achieve a balance. Such a project balance sheet represents the compromise between management's and project managers' views.