Project selection criteria or project selection method or you could say that how you are going to actually identify which investment is good. It is very simple that you as you as an individual, have some money in your hand and you want to invest, will you put it in the bank? Could you put it in to give it to some friend who's going to invest it all you're going to invest in the stock it completely depends on how your What are your aims, what do you want to have at the end of the day and how, what is your risk appetite. Based on all these informations you actually will able to decide that where you should be putting. One advice is that you should not be having all your eggs in one basket so you must have some real estates. stock, some banking directors, some other investment.

So, at least at the end of the day, they all balance out themselves because whenever you will invest anywhere it is going to give you some returns and they will be profit losses also to think of the returns and losses I mean investment in the long term and if you have a short term investment then you need it then your priorities will be completely different your parameters will be completed. So, when you have a number of interesting and challenging projects to choose from finding a project that is right fit for your organization, right fit for your team skills, right fit for your the level of competence you have, and most importantly, has the best chance to be successful in the first step in effective project communication or project management. Generally, the process is performed by the upper management for example, In the steering committee, the PMO the project selection method, but now you have an important role this role is related to leadership and business in strategic and business.

Coming out of your technical map project management role, you need to understand that what is an invest what are the investment basis for the organization to initiate that this project this is very important to understand, because this would help you identifying that cash in cash that is going out the investment that the organization or an individual or a sponsor is going on the project and kind of a return that he is expecting. I always give one example during my sessions is that when, if a project is supposed to start at point zero in every year for next five years, the out flow or the investment is 50 5050 and 50 and the 60 year investment sprinting and there is a cash flow return of 30 which means there is some sales will happen as part of 30 not I'm talking to in terms of revenue not in terms of profit.

So, there is a $10 as our profit, just think of it as of time period. Now, if your project gets delayed and it goes into the sixth year, and you are asking him to do the investment of another 20, but what is actually you are hitting you are hitting from the both and you are increasing the cost of business from 30 to 50. And obviously, because the business is not already in the market and the business is not currently working, you will be losing that 30 Yes, at the end, from minus 10 to plus two you will end. It's not only that cost, the time to market because every year in the market gives you of greater value in terms of brand recognition. So, there are too many things when you are actually talking of the business. So, as a project manager, it is an advice that please come out of your own den come out of your own shell of technical project management and start learning what is actually mean?

What a project actually means for an organization. So, benefit management methods are the most common approaches to project selections and are usually defined before the project charter and the document in the business case and the benefit management plan. They are defined before, it is very important to understand because you need to know that if the project is not giving you a return Do we still need to go into the business case and a benefit management plan. Now, this is very important to understand that sometimes returns are not hard cash or something returns are not our profits, they could be anything else as I told you, when if you could go back and see what was the reason for initiation of any project, there are multiple reasons you might want to have a market environmental impact on the market, you might have a union pressure, you might have a regulatory pressure, you might have a benchmarking pressure because there are other companies in the market they are getting better and better and better.

So, these are the this has to be done before you going into the any business case and the benefit manager methods like constrained optimization method are also tools for selecting projects, but their approach is much more scientific and match driven. So let us move into the some commonly used economic models like breakeven point where you will actually made sure that all your investments in terms of profits, they are now this is the point where you are at no loss and no profit. This is the point where you have actually taken back all your investment and this is different from payback period because when you are talking of payback period, you are actually ignoring the method of time value of money you are saying that I have invested thousands today, and when are we going to get the money back. But when you are talking about breakeven point, you usually consider the time when your money is something which we'll see in the next slide.

So, the net net present value is the discounted value of investment cash flow is over the period of time. So now, you have invested $100 Today, I'm sure we all agreed that you cannot buy the same amount of value, I'm saying in terms of value because I could say items, but let's talk of value that today. One tips a little bit of petrol. Little bit of dinner, they all at the end of the day it's of value to your money. So, you cannot buy same amount of value today in hundred dollar what you could have done could about five years back and what you could do what you could buy after five years. So, you need to discount this return the internal rate of return is a point which is good enough for you as an organization to invest.

Let's say very small example I will go into the internal rate of return at the end of the as part of the discussion. What is what Where will you invest? This is very important. This all understanding it is very important to know that this project selection methods criteria we are whatever I am going I'm not dealing with the financial people or financial terminologies as how they are using in the financial department. They are what I am discussing is right now, only four The non technical manager which is non financial managers, for the project manager, to understand the value of all these items, it has nothing to do with how the how many other parameters are required for the finance department to play and to start working on the internal rate of return what are the so let's, let's forget all this financial calculation for a moment.

Focus on the project management or the understanding for the project man. When you are talking of internal rate of return, we are saying that if you don't do anything with your money and you put it in the bank, your return is 4% would you invest in 5% It's a risk of loss. So you need to you need to be on your toes to see where your investment is going all these things. The internal rate of return is directly linked with what where the company feels comfortable that now from here onward, we will be open for investment before that. It does not make us It does not make sense for an organization to invest. So, what this is a go no go decision point this is usually done as you can see 4.8 development project charter that whether we should be doing this project or not.

So, project selection is generally the responsibility of the portfolio manager steering committee, it has a goal or decision. So, you have benefit management plan which is you have discussed about economic models, breakeven points a project selection based on the inputs and outputs and they are defined before the project charter then you have a constraint optimization which is more of a scientific and calculate identify the project costs that you need to incur the profits that you the rate returns that you will get compiled the Excel sheet and then move forward. So, it's a very important when you are talking with idea generation, which is like brainstorming So, you have a brainstorming session and you have identified that what should what could be the best projects that could go for our comm for our company then you identified their map returns benefits. And based on this mathematical approach, this can be done scoring models can be done and these are the economic models, which are breakeven present value net present value payback period and cost benefit analysis.

I close my discussion on the introduction of project selection methods criteria here. The next 10 slides we will go into a little bit of detail only for the if with reference to the project managers and non financial managers so that we don't hide the finance part in it.