Internal audit and risk professionals often face the daunting challenge of witnessing millions—or even billions—of dollars invested in projects that fail to achieve their intended outcomes. Research by Bent Flyvbjerg, a professor at Said Business School of Oxford University, reveals that only 8.5% of 16,000 studied projects hit both their cost and time targets. These sobering statistics highlight the importance of effective project assurance in reducing failures and optimizing outcomes.
But what exactly constitutes effective project assurance today? Successful oversight must move beyond basic project controls and governance, focusing instead on the overall health of projects and the organization’s exposure to risks. Here, we explore four actionable insights that internal auditors can use to guide stakeholders toward more effective decision-making and better project outcomes.
1. Setting Up Projects for Success is Critical
Every major project goes through four key phases: direction, design, delivery, and deployment. However, the seeds of success—or failure—are sown in the direction and design phases. This is where organizations must define success, gain stakeholder alignment, and establish solid foundations.
Why It Matters
Organizations that rush into the delivery phase without fully aligning on project goals and setting clear priorities often face disastrous consequences. Data from highly complex projects shows:
- 66% achieve significantly fewer outcomes than planned.
- 63% face major scope reductions.
- 53% exceed their original budgets by twofold.
Flyvbjerg’s research reinforces these challenges, revealing that large infrastructure projects average 20% cost overruns and 20-month delays, with one-third failing to deliver promised benefits.
Internal Audit’s Role
Internal auditors can play a pivotal role in the direction phase, even when called upon during a project’s later stages. By revisiting earlier phases and identifying foundational gaps, auditors can help mitigate risks before they escalate.
Key Questions:
- Does your organization have a standardized approach to setting up projects for success?
- Are stakeholders aligned on goals and trade-offs from the outset?
- Have priorities and deliverables been agreed upon with clear buy-in?
2. Early and Frequent Adjustments Are Crucial
Complex projects are rarely straightforward. They involve numerous uncertainties, stakeholders with competing interests, and changing circumstances. Regular adjustments to project plans during the direction and design phases are essential for long-term success.
Why It Matters
A common pitfall is neglecting deployment activities until late in the process, resulting in incomplete deliverables. Research shows that, on average, projects are missing 20-30% of deliverables from their plans. This oversight significantly hinders value realization and creates a domino effect of follow-up projects to address gaps.
Another challenge is the commitment fallacy, where organizations continue to invest in failing projects simply because of sunk costs. These issues often stem from momentum built during the design stage, which becomes difficult—and costly—to correct.
Internal Audit’s Role
Regular assurance reviews enable internal auditors to identify risks and propose timely course corrections. By demonstrating the potential consequences of gaps or missed deliverables, auditors help stakeholders balance delivery risks and project benefits.
Key Questions:
- How often are projects in your organization sent back to earlier phases for rework?
- Are initial project deliverables frequently revisited and adjusted as necessary?
- Do subsequent projects exist solely to address gaps in earlier initiatives?
3. Trade-Offs Must Be Made Early and By the Right People
Trade-offs between scope, cost, and time are inevitable in complex projects. Yet, in over 50% of projects, these decisions are made too late—during the delivery and deployment phases. When this happens, the results often fail to meet business needs, disrupt operations, or compromise organizational goals.
Why It Matters
Delayed trade-off decisions often lead to unplanned changes by delivery teams rather than conscious, strategic decisions by governing bodies. For example, a global ERP implementation affecting operations across 37 countries revealed how misaligned priorities and a focus on delivery complexity, rather than management complexity, resulted in catastrophic outcomes.
Internal Audit’s Role
Internal auditors can advocate for governance processes that focus on outcomes and trade-offs rather than mere milestones. By ensuring decision-makers are engaged early, auditors can steer projects toward strategic compromises that prioritize long-term success over short-term gains.
Key Questions:
- Are trade-offs and their consequences addressed early in your governance processes?
- Do key stakeholders participate in critical decision-making, or are trade-offs delegated to delivery teams?
- Is your organization focused on outcomes rather than simply hitting milestones?
4. Most Causes of Project Failure Could Be Identified Early
One of the most startling findings from Flyvbjerg’s research is that the root causes of project failure are often visible 7 to 12 months before issues become apparent. For instance, extreme cost overruns—where projects end up costing five times their initial estimate—are frequently traceable to decisions made during the design phase.
Why It Matters
Proactive project assurance, leveraging tools to score and visualize initiative health, allows organizations to predict failure points and mitigate risks before they escalate. Benchmarking against “what good looks like” provides a clear framework for assessing progress and identifying gaps.
Internal Audit’s Role
Auditors can adopt a forward-looking approach to project assurance, using early-stage insights to influence subsequent phases. By demonstrating the long-term impact of current gaps, auditors help build a culture of continuous learning and improvement.
Key Questions:
- Can you identify failure points early enough to intervene effectively?
- Are design gaps consistently addressed before moving to delivery or deployment?
- Do stakeholders have a shared definition of project success?
Unlocking Successful Outcomes
The insights outlined above emphasize the critical role internal auditors play as strategic partners in project assurance. By advocating for proactive planning, early adjustments, and informed trade-offs, auditors can help organizations break the cycle of project failures and maximize the return on their investments.
Effective project assurance isn’t just about mitigating risk; it’s about driving meaningful conversations, aligning stakeholders, and creating a culture of accountability. By embracing these strategies, internal audit teams can transform from watchdogs to trusted advisors, ensuring that every project contributes to organizational success.
Ready to Transform Your Project Assurance Strategy?
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Our platform provides real-time insights, customizable frameworks, and advanced analytics to help you deliver robust project assurance and safeguard your organization’s investments. Whether you’re navigating complex projects or optimizing governance processes, Connected Risk equips you with the tools you need to succeed.
Your organization’s success starts with smarter project assurance. Let’s get started.
