Project Cost (2) - Economics and Finance
Key topics covered:
This course will cover how a project price is structured and managed for risk.
It will include an overview of:
- Project economics and the time value of money - how economic metrics including Net Present Value (NPV), Internal Rate of Return (IRR), Return on Investment (ROI) and payback periods are used to evaluate projects;
- How confidence intervals can used to estimate the project’s likelihood of achieving budget - probabilistic (Monte Carlo) and Bayesian methods for uncertainty, event-chain, options and contingency analysis;
- Sensitivity analysis and robustness - how sensitivity and uncertainty is evaluated by adjusting key values in financial models;
- An introduction to project financing structures and accounting definitions - how to structure projects to incorporate flexibility and extract greater value; key design features and required projections of robust and credible financial models
- Project governance, gating and budget approvals - how gating manages risk and provides opportunities for oversight;
- How to manage the planning and sunk cost fallacies, and other biases that can lead to poor project decisions;
- How budget estimates can be ‘reality-checked’ using reference-class forecasting unconscious bias and strategic misrepresentation; and
- Further opportunities to develop as a project professional.
Participants will gain an understanding of techniques and economic considerations needed to price a project and manage risk. The participant will gain an ability to:
- Read, understand and review project estimates, budgets and viability; and
- Frame project decisions in the language and perspectives of project leaders.
Who Should Attend
This course is suitable for anyone looking to frame their projects within your business, the finance system or the wider economy. Specifically relevant to New Managers (both Leading Hands/Supervisors and Graduate Engineers)
Participants should have some experience in project cost development and control. We recommend Project Cost (1): Estimation and Control, be done prior.