Quantitative Methods in Project Management
This book combines theoretical and practical applications and takes project managers through the most important quantitative methods, integrates them, and illustrates interrelationships.
TABLE OF CONTENTS Quantitative Methods in Project Management
Chapter 5: Risk-Adjusted Financial Management
Overview
Value increases when the satisfaction of the customer augments and the expenditure of resources diminishes.
Robert Tassinari
Le Rapport Qualite/Prix, 1985
In Chapter 1, we discussed the idea of the balanced scorecard as one of the business scoring models driving the selection and funding of projects. On every scorecard there are quantitative financial measures that set the bar for project selection and for project success or failure. It is inescapable that project managers will be involved in financial measures and in the financial success of projects. Financial performance in projects, like every other aspect of project performance, is subject to uncertainty: uncertainty of performance by the project team; uncertainty of performance by vendors, suppliers, and partners; and ultimately, uncertainty of financial performance by project deliverables in the marketplace. Uncertainty, we know, is risk. In this chapter, we introduce the financial concepts most important to the project manager, but we introduce them in the context of risk adjustments that are made to provide a more realistic context for measurement and evaluation.
Financial Statements
Finance officers have long-established standards for reporting the numbers. The general body of knowledge for accounting standards is contained in the Generally Accepted Accounting Principles (GAAP), published and maintained by the accounting industry. Within your business, the controller (comptroller, if you are in the government) is the chief accountant. The controller interprets and applies the GAAP to the specifics of your company.
Financial information is more often than not presented on a set of "financial...
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