When the actual benefits of a venture are less than the projected or estimated benefits, the result is known as a benefit shortfall.
If, for instance, a company is launching a new product or service and projected sales are 40 million dollars per year, whereas actual annual sales turn out to be only 30 million dollars, then the benefit shortfall is said to be 25 percent. Sometimes the terms "demand shortfall" or "revenue shortfall" are used instead of benefit shortfall.
Public and private enterprises alike fall victim to benefit shortfalls. Prudent planning of new ventures will include the risk of benefit shortfalls in
risk assessment
Broadly speaking, a risk assessment is the combined effort of:
# identifying and analyzing potential (future) events that may negatively impact individuals, assets, and/or the environment (i.e. hazard analysis); and
# making judgments "on the ...
and
risk management.
The discipline of
benefits realisation management Benefits Realization Management (BRM) (also benefits management, benefits realisation or project benefits management) is one of the many ways of managing how time and resources are invested into making desirable changes.
Benefits Realization Manage ...
seeks to identify any benefits shortfall as early as possible in a project or programmes delivery in order to allow corrective action to be taken, costs to be controlled and benefits realised.
See also
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Cost overrun
A cost overrun, also known as a cost increase or budget overrun, involves unexpected incurred costs. When these costs are in excess of budgeted amounts due to a value engineering underestimation of the actual cost during budgeting, they are known ...
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Cost-benefit analysis
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Downside risk
Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference.
Risk measures typically quantify the downside risk ...
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Efficient contract theory
Efficient contract theory suggests that in a strong-form efficient market, if a contract exists, then it must be efficient due to survivorship bias.
For example, the initial public offering market in the United States has an underwriting spread ...
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Hiding hand principle
The hiding hand principle is a theory that offers a framework to examine how ignorance (particularly concerning future obstacles when person first decides to take on a project) intersects with rational choice to undertake a project; the intersecti ...
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Optimism bias
Optimism bias (or the optimistic bias) is a cognitive bias that causes someone to believe that they themselves are less likely to experience a negative event. It is also known as unrealistic optimism or comparative optimism.
Optimism bias is commo ...
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Planning fallacy
The planning fallacy is a phenomenon in which predictions about how much time will be needed to complete a future task display an optimism bias and underestimate the time needed. This phenomenon sometimes occurs regardless of the individual's know ...
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Reference class forecasting
Reference class forecasting or comparison class forecasting is a method of predicting the future by looking at similar past situations and their outcomes. The theories behind reference class forecasting were developed by Daniel Kahneman and Amos ...
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Underconsumption Underconsumption is a theory in economics that recessions and stagnation arise from an inadequate consumer demand, relative to the amount produced. In other words, there is a problem of overproduction and overinvestment during a demand crisis. The ...
– macroeconomic form
References
* Cost Management: Book: Measuring, Monitoring & Motivating Performance By K. P. Gupta
Problems in business economics
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