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    nced portfolio drive the benefits getting the organisation to accept the re-prioirtised and energized projects
    □ Communicate revised portfolio priorities
    □ Reorganise resources
    □ Mothball all projects where the return is less than the revised cost of capital

    Stage 4 – accelerate those projects where capital is a key element in the business contribution made by the project
    Stage 5 - Track the benefits against the Benefits realization charts to confirm the Business is

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    The last time Inflation was above 4% interest rates were 11%, Terry Waite had just been released and it was the 17th of November 1991. In business terms many lifetimes ago. Whether the Bank of England will raise interest rates to 11% to achieve Gordon Brown’s mandate I will leave to the Money markets to speculate. It is unlikely that interest rates and hence the cost of capital will return the “lowest rates in 30 years” within the next two years.

    Within the context of Business’ implementing projects how should they respond to the changing environment? Those industries with capital intensive projects; Construction, Supply Chain related (warehousing, logistics, stock management) and IT Systems (ERP never cost less than a ?1.0m to implement) will be impacted most and what can we learn from their processes? Below is a five step process which will aid management teams to focus their attention on the key tasks.

    Stage One, demands a review of the projects applying the benefits ratio matrix below. This enables the management team to classify projects in order that they can be compared not in absolute terms (Amount the project is spending) but relative to the Capital Expenditure Budget and the benefits ratios the project will achieve. Each project is re-evaluated and the figures calculated and placed in the grid below.

    Once collated all the projects are then classified

    Stage 2 - The project triage aims to determine how a project should be managed
    □ Stopping those projects which are capital intensive and will not drive the required rate of return given the increase in Cost of Capital.
    □ Starting those projects which provide a higher return, bringing forward projects that will increase revenue and reduce overheads in order that the business has the capacity to absorb the impact of a hostile interest rate.
    □ Continue the projects that are strategically correct but drive them harder in order that the business can respond quicker than its competitors.

    Stage 3 - With the newly re-balanced portfolio drive the benefits getting the organisation to accept the re-prioirtised and energized projects
    □ Communicate revised portfolio priorities
    □ Reorganise resources
    □ Mothball all projects where the return is less than the revised cost of capital

    Stage 4 – accelerate those projects where capital is a key element in the business contribution made by the project
    Stage 5 - Track the benefits against the Benefits realization charts to confirm the Business is

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    uld they respond to the changing environment? Those industries with capital intensive projects; Construction, Supply Chain related (warehousing, logistics, stock management) and IT Systems (ERP never cost less than a ?1.0m to implement) will be impacted most and what can we learn from their processes? Below is a five step process which will aid management teams to focus their attention on the key tasks.

    Stage One, demands a review of the projects applying the benefits ratio matrix below. This enables the management team to classify projects in order that they can be compared not in absolute terms (Amount the project is spending) but relative to the Capital Expenditure Budget and the benefits ratios the project will achieve. Each project is re-evaluated and the figures calculated and placed in the grid below.

    Once collated all the projects are then classified

    Stage 2 - The project triage aims to determine how a project should be managed
    □ Stopping those projects which are capital intensive and will not drive the required rate of return given the increase in Cost of Capital.
    □ Starting those projects which provide a higher return, bringing forward projects that will increase revenue and reduce overheads in order that the business has the capacity to absorb the impact of a hostile interest rate.
    □ Continue the projects that are strategically correct but drive them harder in order that the business can respond quicker than its competitors.

    Stage 3 - With the newly re-balanced portfolio drive the benefits getting the organisation to accept the re-prioirtised and energized projects
    □ Communicate revised portfolio priorities
    □ Reorganise resources
    □ Mothball all projects where the return is less than the revised cost of capital

    Stage 4 – accelerate those projects where capital is a key element in the business contribution made by the project
    Stage 5 - Track the benefits against the Benefits realization charts to confirm the Business is

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    nagement team to classify projects in order that they can be compared not in absolute terms (Amount the project is spending) but relative to the Capital Expenditure Budget and the benefits ratios the project will achieve. Each project is re-evaluated and the figures calculated and placed in the grid below.

    Once collated all the projects are then classified

    Stage 2 - The project triage aims to determine how a project should be managed
    □ Stopping those projects which are capital intensive and will not drive the required rate of return given the increase in Cost of Capital.
    □ Starting those projects which provide a higher return, bringing forward projects that will increase revenue and reduce overheads in order that the business has the capacity to absorb the impact of a hostile interest rate.
    □ Continue the projects that are strategically correct but drive them harder in order that the business can respond quicker than its competitors.

    Stage 3 - With the newly re-balanced portfolio drive the benefits getting the organisation to accept the re-prioirtised and energized projects
    □ Communicate revised portfolio priorities
    □ Reorganise resources
    □ Mothball all projects where the return is less than the revised cost of capital

    Stage 4 – accelerate those projects where capital is a key element in the business contribution made by the project
    Stage 5 - Track the benefits against the Benefits realization charts to confirm the Business is

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    will not drive the required rate of return given the increase in Cost of Capital.
    □ Starting those projects which provide a higher return, bringing forward projects that will increase revenue and reduce overheads in order that the business has the capacity to absorb the impact of a hostile interest rate.
    □ Continue the projects that are strategically correct but drive them harder in order that the business can respond quicker than its competitors.

    Stage 3 - With the newly re-balanced portfolio drive the benefits getting the organisation to accept the re-prioirtised and energized projects
    □ Communicate revised portfolio priorities
    □ Reorganise resources
    □ Mothball all projects where the return is less than the revised cost of capital

    Stage 4 – accelerate those projects where capital is a key element in the business contribution made by the project
    Stage 5 - Track the benefits against the Benefits realization charts to confirm the Business is

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    nced portfolio drive the benefits getting the organisation to accept the re-prioirtised and energized projects
    □ Communicate revised portfolio priorities
    □ Reorganise resources
    □ Mothball all projects where the return is less than the revised cost of capital

    Stage 4 – accelerate those projects where capital is a key element in the business contribution made by the project
    Stage 5 - Track the benefits against the Benefits realization charts to confirm the Business is getting a return on its investment.

    Whilst we are unsure as to when the Bank of England will reduce interest rates, those companies which actively review their project activity will be better placed to maximise the resources they have available. When interests rates fall they will again be poised to recommence the Capital projects they placed on hold and drive increased business value. Terry Waite was held in captivity for four years and nine months (2/2/1987 to 17/11/1991). Let us hope that we will not have place capital intensive projects on hold for as long. However those companies that do nothing are in danger of being impacted by the Bank of England’s policies and very few bank managers will support capital hungry organisations during a period of rising cost drive inflation.

    Takeaway Stay competitive - assess your portfolio of projects regularly and especially when there is a significant change in market conditions.

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