Investment appraisal and prioritization: balancing risks, returns and obligations

Investment appraisal and prioritization

What kinds of financial and non-financial measures are used to evaluate telecom capital investment priorities?

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In evaluating the attractiveness of a potential investment, companies typically consider traditional financial measures. There is also an emerging use of cash value-added (CVA), which assesses the long-term cash generating capacity of investments. 

According to the respondents to KPMG’s 2015 global survey:

  • 63% say all investment types follow a common assessment and evaluation process 
  • Only 26% say renewal and ‘business-as-usual’ investments receive a strong challenge
  • Just 42% say business cases include financial and non-financial hurdles
  • 61% use business cases that evaluate impact of investment on profit/cash flow, and include sensitivity analyses 
  • Only 32% build contingencies into capital plans for one-off, unplanned expenditure.

The survey reveals that many telecom business units prepare a business unit capital plan supported by business case submissions. Invariably the sum of the submissions is greater than the available capital, or ‘capital envelope.’

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