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.
Capital projects are integral to strategyView chart
Yet, more than 75% experience budget overrunsView chart
If mismanaged, capital projects erode share valueView chart
Across industries, loss in share value increases steadily over timeView chart
Smaller companies suffer larger lossesView chart
Capital-intensive industries recorded the largest share erosionView chart
Capital projects represent substantial risk...View chart
...caused by a variety of factorsView chart
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?