Cost / Benefit / Risk Analysis

There are numerous similar methods of analysing costs, benefits and risks associated with a decision or plan. The general procedure involved is as follows:

Cost / Benefit

1. Define, or breakdown the plan / decision /process into its elements by drawing up a flowchart or list of inputs, outputs, activities and events.

2. Calculate, research or estimate the cost and benefit associated with each element. (Include if possible direct, indirect, financial and social costs and benefits)

3. Compare the sum of the costs with the sum of the benefits.

Benefit / Risk

4. Rank the elements into a hierarchy that reflects their impact of their potential success / failure on the whole process. If the variation in the potential impact of the ranked elements is significant, then:

5. Assign weighting values to each element.

6. Estimate the likelihood of success or failure of each element.

7. Multiply the likelihood of success or failure for each element by its weighting value.

8. Compare the risk (result of 7) with the costs and benefits associated with (3).