Examining the Business Case – Considerations Of Risk

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Business Case

The business case requires much more than a cost-benefit analysis — that is too simplistic for complex business decisions. For example, a more in-depth analysis would highlight that while the payback from project A might be twice that of project B, this benefit may be negated when higher levels of risk are considered. Managers are increasingly concerned with risk and for good reason. That is the risk the desired results will not be achieved or that other unwanted consequences will arise.

For buyers this is the era of playing it safe. The appetite for risk has diminished greatly and managers are increasingly reluctant to put their neck on the line for a risky project, purchase or vendor. This is having a major impact on the nature of decision-making. Indeed, the buying process, with its emphasis on planning, consultation and analysis, is in effect a risk management process.

Buyers tell us that they are most sensitive to risk when the following factors are present:

The buying decision is new (as opposed to, for example, a repeat purchase).
The buying decision has major consequences, is high profile or big budget.
The vendor is not well known or another vendor owns the account.
The product, process or technology involved is new.
The buying decision is politically sensitive.
The buying group is large.

So, salespeople need to be aware where any of these factors are present. However, they also need to be aware that risk comes in many forms. That is because the risk of choosing the wrong supplier is often not the greatest risk when it comes to major buying decisions.

‘Playing it safe’ is built into the design of the buying process by means of the steps, consultation, multiple decision-makers, documentation and signoffs around the business case.

Regardless of the choice of provider and solution, there are many other factors (business, technology and project-related risks, for example) that may impinge on the achievement of the required outcome. So, the salesperson cannot be solely concerned with convincing the buyer their solution will deliver on its promises, but must also demonstrate how the solution will enable the buyer to achieve the outcomes they expect.

The business case must include scenarios and probabilities as regards results and outcomes. It must also include a register of risk, listing each risk, rating it and outlining how it is to be managed. So, if a salesperson’s proposal is going to mirror the business case of the buyer it has to add risk into the equation.

Compliance Issues

The business case must also address risk-related elements, such as details of implementation, governance and control. In particular it must address issues of compliance — whether that is adherence to internal standards or external regulation. This clearly is a factor that is growing in importance.