The Project Risk Profile

This essay stresses that the protocol produces meaningful project profiles using a consistent approach and fully quantifying concepts which might be considered non-quantifiable. Importantly, this protocol allows for the assessment of risks and strategic factors which are important for good decision-making. The PRP and SI are somewhat subjective calculations, and the FAP protocol forces management and appraisal teams to consider reasonable values for important, subjective judgments.
This paper makes a conclusion that management will reject projects outright if the risks are too great or if the projects do not fit with the company’s overall strategic vision, but using the FAP protocol allows for a full understanding of financial and strategic potentials. Aspects of projects such as deferment, growth or abandonment are important considerations, and the FAP protocol structure allows evaluation teams to include those aspects in the evaluations. Since several sub-models play into the overall structure of the FAP model, evaluators are afforded flexibility. No project is rejected based on a single aspect of consideration, nor are projects accepted which may produce undesirable results because strategy and risk were not accounted for during assessment. The FAP model produces a dynamic and pragmatic approach to capital project evaluations and allows the management and appraisal teams to introduce their judgments into the model in a straightforward and structured way.

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