Economic evaluations help professionals analyze the potential benefits and risks of a project or policy. There are three types of economic evaluations: cost-benefit analysis, cost-effectiveness analysis, and valuation and weighting. Consultants or valuation experts can provide objective analysis and advice. Governments also use economic evaluations to determine the effectiveness of policies and plans.
All financially challenged organizations perform economic assessments at some point. Simply put, an economic evaluation is a method by which a professional can analyze the potential benefits and risks of a project or policy in order to determine whether it is worth pursuing or forgoing. An appraisal can also help a professional determine if a project is well planned and financed or needs to be streamlined with a new strategy. Some key factors that are often included in an economic evaluation are the cost of a project, the revenue or earnings that a project can generate, and the risks associated with a project.
Some experts believe that there are three different types of economic evaluation: cost-benefit analysis, cost-effectiveness analysis, evaluation and weighting. Cost benefit refers to comparing the economic benefits of projects with the cost of projects to determine which projects are more desirable. Cost-effectiveness, on the other hand, compares the benefits of a project that have no financial value, such as health, with the costs of a project. Healthcare industries often use cost-effectiveness analyses.
When professionals practice the Economic Valuation Method of Valuation and Weighting, they create a list of potential project options. For each listing, they provide a score for each factor that has no monetary value. Scores are based on the effectiveness and benefits associated with each factor. Total scores are calculated at the end of the process, allowing professionals to see which project is most beneficial.
When managers and executives perform valuations in business, they often hire consultants or valuation experts. These professionals may have a background in accounting or financial management and are able to provide objective analysis and advice on the status of a project. Consultants might work closely with project managers to discuss goals and concerns.
Many experts believe that an economic evaluation should be part of any management process where a new system or project is introduced. In any industry, a number of variables come into play when it comes to realizing economic prospects. Market trends and competitor behaviors can greatly influence the decisions managers make. An effective economic evaluation should present the manager with a set of new perspectives based on accurate data that can allow him to rethink strategies.
Governments also use economic evaluations to determine the effectiveness of policies and plans. For example, a city government considering building a new road may consider the cost of construction versus the benefits of a new road. In general, an economic evaluation for a government agency aims to develop projects that can benefit the public and require a realistic budget.
Protect your devices with Threat Protection by NordVPN
