Known unknowns, unknown unknowns
Rob Turner
Reflecting the impacts of COVID-19 in your business case
“Known unknowns” and “unknown unknowns” were phrases that came into the public conscience back in the early 2000s when they were used by Donald Rumsfeld, the then US Secretary of State for Defence, at a Defence Department briefing on military intelligence. They are phrases that are equally applicable to COVID-19 and particularly how it will impact towns over the next few years.
The social and economic impacts of COVID-19 have been, and will continue to be, profound and affect every element of our societies, business communities and local economies. Some of these impacts will ‘bounce back’ relatively quickly, others will take months if not years to recover, and others will have been changed permanently. What is known is that these unknowns pose a challenge to the preparation of business cases.
In this uncertain context, it will be important that Towns’ business cases consider the impacts of COVID-19 in each of the different cases. And these considerations should look at both the negatives as well as the potential opportunities.
In the strategic case, it will be important to give consideration to how behaviours and attitudes may have changed locally and how this will have impacted on need and demand. For example, how might the change in consumer behaviour around ‘thinking local’ support wider ambitions to increase footfall and maximise the benefits of public realm or active travel investments?
In the economic case, the assessment of benefits needs to reflect the different conditions brought about by COVID-19. For example, will a new business centre or shared workspace achieve the same levels of occupancy as previously forecast? What impact will significant increases in unemployment have? Does it actually increase the additionality of particular interventions as the demand for jobs outweighs supply in the short to medium term?
In the commercial case, there is a need to think through the deliverability aspects. While social distancing measures may be relaxing at the time of delivery, they may remain longer, which will have impacts on how the work can be programmed and the speed at which projects can be completed.
In the management case, consideration should be given to the fact that wider local authority resources are likely to be limited both in terms of staff capacity and focus as well as wider financial resources. The implications of this should be considered and discussed with your local authority.
In the financial case the generally weaker property market and construction sector – in the short term – will have implications on the costs that will be incurred. Discussion in this case should therefore reflect these dynamics and implications in relation to Town Fund funding.
There are two important ways you can help manage this uncertainty as you develop your business cases:
1) The use of sensitivity analysis – to assess how the likely benefits could vary in different scenarios is particularly important in the economic case. In running different sensitivities, you should focus on those factors that are likely to have the biggest impact on the overall project.
2) Robust assessments of risk – reflecting in each case the potential uncertainties and risks associated with COVID-19 and identifying appropriate mitigations.
Given the range of “unknown unknowns” currently, the overarching need is one of agility. As it is only by being flexible that Towns will be able to respond to risk and adapt and future proof their planned projects so that they are delivered with the greatest chance of success.
We are developing further guides on sensitivity testing and risk assessment which can help guide you through these tasks. If you have specific questions in this area, please speak to your Town Coordinator.