Board of Directors role on capital projects

Large capital projects — with their multi-year timelines, changing requirements, and complex procurement issues — are inherently risky. They require diligent oversight from management and the board, given the common occurrence of budget overruns and their impact on the company’s financial health.

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Capital projects are integral to strategy

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Yet, more than 75% experience budget overruns

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If mismanaged, capital projects erode share value

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Across industries, loss in share value increases steadily over time

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Smaller companies suffer larger losses

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Capital-intensive industries recorded the largest share erosion

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Capital projects represent substantial risk...

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...caused by a variety of factors

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Manage risk by getting back on track

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Boards understand risk

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How can a board best manage capital project risk?

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Methodology and Notes

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Capital projects are vital to a company’s strategy.
Here’s why.

Capital spending needs to serve business strategy. It’s really about linking the corporate vision and strategy to the “so what?” for capital investment decisions. Boards need an understanding of the business case for each capital project. What’s the rationale? How will it affect the company’s competitive position in the marketplace? What major risks could impede progress? How does this project fit within the company’s overall portfolio?

Roger Wery,Principal, PwC's Management Consulting