Risk management and value management in project appraisal

The appraisal phase of the project life cycle commences with the inception of the project and ends with the sanction of the project for implementation. During the appraisal phase the key decisions on the viability of the project and the most feasible project option are made in sequence. To enable good ideas and realistic projects to be recognised, both risk management and value management techniques are used, among others. This paper examines current industrial practice in project appraisal and indicates why some practitioners expressed a preference for one of these techniques and some for the other. Those preferring value management prior to risk management stated that the objectives of the project and the definition of options must be examined first, whereas those implementing risk management first considered that assessing the risks of the plan developed to achieve project objectives must take priority over maximising opportunities. Both techniques are important in decision making under uncertainty during project appraisal but greater knowledge of their application will reduce future costs incurred through failure to correctly identify viable projects at an early stage.