In the latest post we looked at topic of budgeting for Legal or Tax Projects. The other important point is looking what is the project return on investment (ROI).
Project ROI is representing whether project has positive or negative result (gain or loss). Normally the ROI is calculated as Financial Project Value minus Project cost. Which in most cases is money value of project gains minus money cost of project. This can get complicated if other, non monetary elements get into calculation (for example costs of risk or human factors like employee satisfaction). For this post lets assume ROI is calculated as monetary project benefits minus project cost.
First – why ROI should be calculated and used on a project? For one thing it helps to quantify the business value of the project, what can be helpful in “selling” the project to decision makers and facilitate the decisions related to project. It can be also helpful to prioritize project based on dollar value. Third the monetary return analysis can be a good introduction to discussion on non monetary benefits of legal and tax projects.
Second is legal and tax projects ROI analysis different from other projects types ? The above mentioned benefits of ROI are more less same for all types of projects – but are there any specificities of legal / tax / compliance project ROI calculation? I think yes, legal and tax projects ROPI analysis is slightly different than in other projects. Legal or tax project happen in area where project need is often driven by regulatory or risk management requirements, having said that despite regulatory needs being primary objective it does not mean that monetary rate of return can not be another way of assessing legal or tax project. Quite often legal or tax projects are started because of risk management and avoidance, so monetary return is not anyhow on the radar. Those two aspects (regulatory needs and legal risk management) are usually main and only reasons to start legal or tax project, and precisely because of that adding ROI analysis of the project to the list can be beneficial.