Ulrich Pidun, Sebastian Stange

Understanding the underlying risks should be a particular focus in project selection. Research has shown time and again that human beings are weak at risk assessment, but some techniques can help. A good starting point can be to frame the discussion in terms of a base question: What do we need to believe in to make this an attractive investment? This framing can help uncover the implicit business assumptions behind a proposal and the key risks hidden in the business plan.


In our experience, it is more important to get the relevant risks out on the table than to quantify their exact impact. A method that often helps is a “premortem analysis”: imagining that the planned investment has failed terribly, then asking everyone to find reasons for what went wrong. The focus quickly shifts from confirming that the investment has great potential to uncovering its hidden risks. The required funds should only be committed when these risks seem manageable.

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