Project Risk Management: The Importance Of Project Management

Project leadership is responsible for managing project costs and with changing times, managing profitability and return on investment. More so, this is an important measure of project success and one key parameter that the project sponsor and the organization’s top leadership is usually interested in.

Project Leaders are accountable to:

• Meet project financial objectives by completing required financial management activities.

• Achieve audit compliance requirements.

• Report all financial data accurately and timely.

• Anticipate and manage risks inherent to delivering project, reach out for support early.

• Adopt the mindset that they are the “owner of the business”.

• Provide accurate forecast. Accurate forecasts are critical because they

Comparisons provide information on variances that may indicate project risk or that forecast is inaccurate.

• Ensure legal and regulatory compliance.

• Win investor and creditor confidence.

• Achieve Gross Profit (GP) goals as defined in the price case.

• Set and manage organization’s expectations by documenting and monitoring Conditions of Satisfaction.

• Maintain clear and effective communications with senior management during all phases of engagement.

• Ensure appropriate discipline, attention, scrutiny and oversight to provide accurate reports (e.g. Expense reimbursement, Forecasting, purchase orders, client status reports).

• Reconcile project financial data to Ledger on a monthly basis.

• Manage Accounts Payable.

• Receive subcontractor invoices, make accounting entries and schedule payments of invoices.

• Facilitate accurate and timely payment of vendor invoices.

The project managers normally come from technical background and grow in profession of project management. Many a times they require help in understanding and managing finance and accounting processes. Some basic information on financial terms which can help the transformation leaders to communicate more effectively with senior business leaders is given

In order to drive cost efficiency of the whole organization, the cost of the capital v/s growth is mapped. The higher the cash flow, the better the growth thus helping the growth in turn providing the cash and thus a return on investment hence, increase in the overall profitability.

Example: Many business organizations consider that to run IT Operations by themselves do not provide required return on investment. Outsourcing significantly increases ROI. These businesses are able to focus on their core skills and have increased cash flow which can be spent on growth. They would rather outsource it to someone who can handle it better.

f. Financial Statements

There are mainly three financial statements, which provide financial health of any organization:

• Income Statement: It provides valuable insights into the management of revenues and expenses. The Income Statement is probably the single most widely used financial statement by executives and investors and provides valuable clues into how well a company is doing over a period of time. It gives required information on financial health of a fiscal year or