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Benefit Risk
When the actual benefits of a venture are less than the projected or estimated benefits, the result is known as a benefit shortfall. If, for instance, a company is launching a new product or service and projected sales are 40 million dollars per year, whereas actual annual sales turn out to be only 30 million dollars, then the benefit shortfall is said to be 25 percent. Sometimes the terms "demand shortfall" or "revenue shortfall" are used instead of benefit shortfall. Public and private enterprises alike fall victim to benefit shortfalls. Prudent planning of new ventures will include the risk of benefit shortfalls in risk assessment and risk management. The discipline of benefits realisation management seeks to identify any benefits shortfall as early as possible in a project or programmes delivery in order to allow corrective action to be taken, costs to be controlled and benefits realised. See also *Cost overrun * Cost-benefit analysis *Downside risk *Efficient contract t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Risk Assessment
Broadly speaking, a risk assessment is the combined effort of: # identifying and analyzing potential (future) events that may negatively impact individuals, assets, and/or the environment (i.e. hazard analysis); and # making judgments "on the tolerability of the risk on the basis of a risk analysis" while considering influencing factors (i.e. risk evaluation). Put in simpler terms, a risk assessment determines possible mishaps, their likelihood and consequences, and the tolerances for such events. The results of this process may be expressed in a quantitative or qualitative fashion. Risk assessment is an inherent part of a broader risk management strategy to help reduce any potential risk-related consequences. Need Individual risk assessment Risk assessment are done in individual cases, including patient and physician interactions. Individual judgements or assessments of risk may be affected by psychological, ideological, religious or otherwise subjective factors, which impa ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Benefits Realisation Management
Benefits Realization Management (BRM) (also benefits management, benefits realisation or project benefits management) is one of the many ways of managing how time and resources are invested into making desirable changes. Benefits Realization Management has four main definitions. The first definition is to consider benefits management as an organisational change process. It is defined as "the process of organizing and managing, such that the potential benefits arising from the use of IT are actually realized". The second definition perceives it as a process. Benefits management is defined by the Association for Project Management (APM) as the identification, definition, planning, tracking and realization of business benefits. The third definition is to apply this concept on project management level. Project benefits management is defined as "the initiating, planning, organizing, executing, controlling, transitioning and supporting of change in the organisation and its consequences as ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cost Overrun
A cost overrun, also known as a cost increase or budget overrun, involves unexpected incurred costs. When these costs are in excess of budgeted amounts due to a value engineering underestimation of the actual cost during budgeting, they are known by these terms. Cost overruns are common in infrastructure, building, and technology projects. For IT projects, a 2004 industry study by the Standish Group found an average cost overrun of 43 percent; 71 percent of projects came in over budget, exceeded time estimates, and had estimated too narrow a scope; and total waste was estimated at $55 billion per year in the US alone. Many major construction projects have incurred cost overruns; cost estimates used to decide whether important transportation infrastructure should be built can mislead grossly and systematically. Cost overrun is distinguished from cost escalation, which is an ''anticipated'' growth in a budgeted cost due to factors such as inflation. Causes Recent works by Ahia ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Downside Risk
Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk can be measured either with downside beta or by measuring lower semi-deviation. The statistic ''below-target semi-deviation'' or simply ''target semi-deviation'' (TSV) has become the industry standard. History Downside risk was first modeled by Roy (1952), who assumed that an investor's goal was to minimize his/her risk. This mean-semivariance, or downside risk, model is also known as “safety-first” technique, and only looks at the lower standard deviations of expected returns which are the potential losses. This is about the same time Harry Markowitz was developing mean-variance theory. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Efficient Contract Theory
Efficient contract theory suggests that in a strong-form efficient market, if a contract exists, then it must be efficient due to survivorship bias. For example, the initial public offering market in the United States has an underwriting spread of approximately 7% in the majority of cases despite some offerings being of differing size or difficulty. Some argue that this cannot reflect the true costs to the investment bank, as it does not account for economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ... that the bank would no doubt benefit from for larger deals. Efficient contract theory would suggest that given the investment banking market is competitive and there is freedom of entry and exit, 7% must be an efficient contract otherwise it would not exist.Bruce R L ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Hiding Hand Principle
The hiding hand principle is a theory that offers a framework to examine how ignorance (particularly concerning future obstacles when person first decides to take on a project) intersects with rational choice to undertake a project; the intersection is seen to provoke creative success over the obstacles through the deduction that it is too late to abandon the project. The term was coined by economist Albert O. Hirschman. Writing in The New Yorker, Malcolm Gladwell brought the concept to life, retelling the story of the construction of a railway tunnel through Hoosac Mountain in northwestern Massachusetts. Construction proved much harder than anticipated, but eventually was completed, with positive results. Gladwell was reviewing the book, "Worldly Philosopher: The Odyssey of Albert O. Hirschman," by Jeremy Adelman (Princeton University Press, 2013). Bent Flyvbjerg and Cass Sunstein take issue with Hirschman's principle and argue that there are really two Hiding Hands, a Benevolen ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Optimism Bias
Optimism bias (or the optimistic bias) is a cognitive bias that causes someone to believe that they themselves are less likely to experience a negative event. It is also known as unrealistic optimism or comparative optimism. Optimism bias is common and transcends gender, ethnicity, nationality, and age.O’Sullivan, Owen P. (2015)The neural basis of always looking on the bright side.''Dialogues in Philosophy, Mental and Neuro Sciences'', 8(1):11–15. Optimistic biases are even reported in non-human animals such as rats and birds. However, autistic people are less susceptible to optimistic biases. Four factors can cause a person to be optimistically biased: their desired end state, their cognitive mechanisms, the information they have about themselves versus others, and overall mood. The optimistic bias is seen in a number of situations. For example: people believing that they are less at risk of being a crime victim, smokers believing that they are less likely to contract lung can ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Planning Fallacy
The planning fallacy is a phenomenon in which predictions about how much time will be needed to complete a future task display an optimism bias and underestimate the time needed. This phenomenon sometimes occurs regardless of the individual's knowledge that past tasks of a similar nature have taken longer to complete than generally planned. The bias affects predictions only about one's own tasks; when outside observers predict task completion times, they tend to exhibit a pessimistic bias, overestimating the time needed. The planning fallacy involves estimates of task completion times more optimistic than those encountered in similar projects in the past. The planning fallacy was first proposed by Daniel Kahneman and Amos Tversky in 1979. In 2003, Lovallo and Kahneman proposed an expanded definition as the tendency to underestimate the time, costs, and risks of future actions and at the same time overestimate the benefits of the same actions. According to this definition, the plann ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Reference Class Forecasting
Reference class forecasting or comparison class forecasting is a method of predicting the future by looking at similar past situations and their outcomes. The theories behind reference class forecasting were developed by Daniel Kahneman and Amos Tversky. The theoretical work helped Kahneman win the Nobel Prize in Economics. Reference class forecasting is so named as it predicts the outcome of a planned action based on actual outcomes in a reference class of similar actions to that being forecast. Discussion of which reference class to use when forecasting a given situation is known as the reference class problem. Overview Kahneman and Tversky Decision Research Technical Report PTR-1042-77-6. In found that human judgment is generally optimistic due to overconfidence and insufficient consideration of distributional information about outcomes. People tend to underestimate the costs, completion times, and risks of planned actions, whereas they tend to overestimate the benefits of ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Underconsumption
Underconsumption is a theory in economics that recessions and stagnation arise from an inadequate consumer demand, relative to the amount produced. In other words, there is a problem of overproduction and overinvestment during a demand crisis. The theory formed the basis for the development of Keynesian economics and the theory of aggregate demand after the 1930s. Underconsumption theory narrowly refers to heterodox economists in Britain in the 19th century, particularly from 1815 onwards, who advanced the theory of underconsumption and rejected classical economics in the form of Ricardian economics. The economists did not form a unified school, and their theories were rejected by mainstream economics of the time. Underconsumption is an old concept in economics that goes back to the 1598 French mercantilist text ''Les Trésors et richesses pour mettre l'Estat en Splendeur'' (''The Treasures and riches to put the State in Splendor'') by Barthélemy de Laffemas, if not earlier. Th ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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