Page 34 - MetalForming October 2015

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MetalForming/October 2015
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Best Practices
and in some cases put the entire busi- ness at risk. To reduce the risk of proj- ect failure, it’s important to challenge your assumptions as well as their related risks and dependencies. Con- sider these questions:
• What happens if the project goes over budget—by 5, 10 or even 20 per- cent?
• How would a delay in project com- pletion impact the company?
• Does the success of the project rely on just one or two key employees? • Will the project affect existing oper- ations, and have you developed ade-
quate contingency plans?
• How aggressive has management
been with its key assumptions—if not with more than 90-percent certainty, have you considered the financial impact to your capital structure or working capital?
Implemented successfully, capital expenditures can create competitive advantages, improve EBITDA and shareholder value, and offer benefits for company employees.
• Have you identified all of the potential risks to project success, and developed adequate mitigation plans that your team is ready to deploy?
• How much visibility do you have on progress to date, and do you have clear measures in place to monitor progress and quickly intervene to course-correct?
• Can you adequately monitor and manage third parties that play a critical role in completing the project?
• How well do resource needs match resource availability?
Risk-Proof Your Capital Investment
Responsibility for effective capital- project management falls on the shoul- ders of senior management, and requires a multidisciplined approach. Best practices include:
• Failure analysis. Using a systematic approach, ask: What could go wrong? How will this impact the company? What can we do to plan for failures?
• Project management. Identify major assumptions, risks and depend- encies, and develop detailed project activities—who (resources), what (actions) and when (timing/sequencing).
• Pressure-testing your forecast and budget. Critically examine the budget, schedule and forecasts, and model the risk impact and related mit- igation costs.
If you’re considering a new capital project, be sure to dedicate the neces- sary resources within your organization early-on to review the project plan. The project may run smoothly as planned, but it’s good to have the resources in place to help clear any obstacles encountered along the way.
MF
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