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Financial Analysis Techniques When an organization needs a high level of confidence in the estimate of some critical element, it may call on an external expert to perform or review the estimate. The organization may compare an independent estimate against their internal estimate to determine what adjustments may be needed. 10.19.4 Usage Considerations Complimentary IIBA® Member Copy. Not for Distribution or Resale. .1 Strengths • Estimates provide a rationale for an assigned budget, time frame, or size of a set of elements. • Without an estimate, teams making a change may be provided an unrealistic budget or schedule for their work. • Having a small team of knowledgeable individuals provide an estimate by following a defined technique generally results in a closer predictor of the actual value than if an estimate was made by one individual. • Updating an estimate throughout a work cycle, in which the estimated elements are refined over time, incorporates knowledge and helps ensure success. .2 Limitations • Estimates are only as accurate as the level of knowledge about the elements being estimated. Without organization or local knowledge, estimates can vary widely from the actual values determined later. • Using just one estimation method may lead stakeholders to have unrealistic expectations. 10.20 Financial Analysis 10.20.1 Purpose 10.20.2 Description Financial analysis is used to understand the financial aspects of an investment, a solution, or a solution approach. Financial analysis is the assessment of the expected financial viability, stability, and benefit realization of an investment option. It includes a consideration of the total cost of the change as well as the total costs and benefits of using and supporting the solution. Business analysts use financial analysis to make a solution recommendation for an investment in a specific change initiative by comparing one solution or solution approach to others, based on analysis of the: • initial cost and the time frame in which those costs are incurred, • expected financial benefits and the time frame in which they will be incurred, • ongoing costs of using the solution and supporting the solution, 274
Techniques Financial Analysis 10.20.3 Elements • risks associated with the change initiative, and • ongoing risks to business value of using that solution. A combination of analysis techniques are typically used because each provides a different perspective. Executives compare the financial analysis results of one investment option with that of other possible investments to make decisions about which change initiatives to support. Financial analysis deals with uncertainty, and as a change initiative progresses through its life cycle, the effects of that uncertainty become better understood. Financial analysis is continuously applied during the initiative to determine if the change is likely to deliver enough business value such that it should continue. A business analyst may recommend that a change initiative be adjusted or stopped if new information causes the financial analysis results to no longer support the initial solution recommendation. .1 Cost of the Change The cost of a change includes the expected cost of building or acquiring the solution components and the expected costs of transitioning the enterprise from the current state to the future state. This could include the costs associated with changing equipment and software, facilities, staff and other resources, buying out existing contracts, subsidies, penalties, converting data, training, communicating the change, and managing the roll out. These costs may be shared between organizations within the enterprise. .2 Total Cost of Ownership (TCO) The total cost of ownership (TCO) is the cost to acquire a solution, the cost of using the solution, and the cost of supporting the solution for the foreseeable future, combined to help understand the potential value of a solution. In the case of equipment and facilities, there is often a generally agreed to life expectancy. However, in the case of processes and software, the life expectancy is often unknown. Some organizations assume a standard time period (for example, three to five years) to understand the costs of ownership of intangibles like processes and software. Complimentary IIBA® Member Copy. Not for Distribution or Resale. .3 Value Realization Value is typically realized over time. The planned value could be expressed on an annual basis, or could be expressed as a cumulative value over a specific time period. .4 Cost-Benefit Analysis Cost-benefit analysis (sometimes called benefit-cost analysis) is a prediction of the expected total benefits minus the expected total costs, resulting in an expected net benefit (the planned business value). Assumptions about the factors that make up the costs and benefits should be clearly stated in the calculations so they can be reviewed, challenged and 275
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v3 A GUIDE TO THE BUSINESS ANALYSIS
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International Institute of Business
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Table of Contents Chapter 4: Elicit
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Table of Contents Complimentary IIB
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The major changes in this release i
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What is Business Analysis? Introduc
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Structure of the BABOK ® Guide Int
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The Business Analysis Core Concept
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Key Terms Business Analysis Key Con
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Requirements Classification Schema
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Stakeholders Business Analysis Key
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Requirements and Designs Business A
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Business Analysis Planning and Moni
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Plan Business Analysis Approach Bus
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Plan Stakeholder Engagement Busines
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Plan Business Analysis Governance B
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Plan Business Analysis Governance B
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Plan Business Analysis Information
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Identify Business Analysis Performa
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Elicitation and Collaboration The E
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Prepare for Elicitation Elicitation
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Conduct Elicitation Elicitation and
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Conduct Elicitation Elicitation and
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Confirm Elicitation Results Elicita
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Communicate Business Analysis Infor
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Communicate Business Analysis Infor
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Manage Stakeholder Collaboration El
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Manage Stakeholder Collaboration El
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Requirements Life Cycle Management
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Requirements Life Cycle Management
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Trace Requirements Requirements Lif
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Trace Requirements Requirements Lif
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Maintain Requirements Requirements
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Prioritize Requirements Requirement
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Assess Requirements Changes Require
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Assess Requirements Changes Require
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Approve Requirements Requirements L
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Approve Requirements Requirements L
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Strategy Analysis Figure 6.0.1: Bus
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Strategy Analysis Figure 6.0.1: Str
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Analyze Current State Strategy Anal
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Define Future State Strategy Analys
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Assess Risks Strategy Analysis 6.3
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Assess Risks Strategy Analysis stak
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Define Change Strategy Strategy Ana
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Figure 7.0.1: Business Analysis Val
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Specify and Model Requirements Requ
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Verify Requirements Requirements An
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Validate Requirements Requirements
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Validate Requirements Requirements
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Define Requirements Architecture Re
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Define Requirements Architecture Re
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Define Design Options Requirements
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Analyze Potential Value and Recomme
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Solution Evaluation makes recommend
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Measure Solution Performance Soluti
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Measure Solution Performance Soluti
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Analyze Performance Measures Soluti
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Analyze Performance Measures Soluti
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Assess Solution Limitations Solutio
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Assess Solution Limitations Solutio
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Assess Enterprise Limitations Solut
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Assess Enterprise Limitations Solut
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Recommend Actions to Increase Solut
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Analytical Thinking and Problem Sol
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Behavioural Characteristics Underly
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Business Knowledge Underlying Compe
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Business Knowledge Underlying Compe
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Communication Skills Underlying Com
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Communication Skills Underlying Com
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Interaction Skills Underlying Compe
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Interaction Skills Underlying Compe
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Tools and Technology Underlying Com
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Acceptance and Evaluation Criteria
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Backlog Management Techniques 10.1.
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Backlog Management Techniques as hi
Page 234 and 235: Balanced Scorecard Techniques Figur
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Page 238 and 239: Brainstorming Techniques 10.5.2 Des
Page 240 and 241: Business Capability Analysis Techni
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Page 250 and 251: Business Rules Analysis Techniques
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Page 254 and 255: Collaborative Games Techniques 10.1
Page 256 and 257: Concept Modelling Techniques 10.11.
Page 258 and 259: Data Dictionary Techniques Data dic
Page 260 and 261: Data Flow Diagrams Techniques 10.13
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Page 264 and 265: Data Mining Techniques Data mining
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Page 268 and 269: Data Modelling Techniques Attribute
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Page 272 and 273: Decision Analysis Techniques Decisi
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Page 282 and 283: Estimation Techniques • Bottom-up
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Page 294 and 295: Functional Decomposition Techniques
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Page 312 and 313: Non-Functional Requirements Analysi
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Page 316 and 317: Observation Techniques Complimentar
Page 318 and 319: Organizational Modelling Techniques
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Prototyping Techniques 10.36.3 Elem
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Reviews Techniques • If the proto
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Reviews Techniques • Ad hoc: an i
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Risk Analysis and Management Techni
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Risk Analysis and Management Techni
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Roles and Permissions Matrix Techni
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Root Cause Analysis Techniques 10.4
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Scope Modelling Techniques 10.41 Sc
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Scope Modelling Techniques .4 Relat
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Sequence Diagrams Techniques 10.42.
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Stakeholder List, Map, or Personas
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Stakeholder List, Map, or Personas
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State Modelling Techniques .2 Limit
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Survey or Questionnaire Techniques
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Survey or Questionnaire Techniques
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SWOT Analysis Techniques enterprise
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Use Cases and Scenarios Techniques
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Use Cases and Scenarios Techniques
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User Stories Techniques 10.48.3 Ele
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Vendor Assessment Techniques 10.49.
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Workshops Techniques 10.50.3 Elemen
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Workshops Techniques the arrival at
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The Agile Perspective Perspectives
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The Business Intelligence Perspecti
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The Information Technology Perspect
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The Business Architecture Perspecti
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The Business Process Management Per
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Glossary business analysis: The pra
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Glossary commercial off-the-shelf (
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Glossary event (business analysis):
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life cycle: A series of changes an
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including scope, budget, schedule,
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Glossary development team can use t
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strategy: A description of the chos
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Glossary verified requirement: A re
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Techniques to Task Mapping 10. Tech
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Contributors Complimentary IIBA® M
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Contributors • Barbara A. Carkeno
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Summary of Changes from BABOK ® Gu
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Index Complimentary IIBA® Member C
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Index Focus Groups 279 Forecasting
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Index Predictive Analytics 386 Proc
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Index Trustworthy 298 Trustworthy a
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STRATEGY REQUIREMENTS SOLUTIONS A G
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