Question

Project Finance question:

In the context of project finance, how can stakeholder engagement enhance project success?

Answer 1

The success of any project is dependent on a number of factors such as clear goals, realistic project schedule, budget, resource, risk, and uncertainty management. But the favorable outcome of a project is based not only on processes but also on people. They’re called stakeholders.

Types of Stakeholders

Every project regardless of its type and stage has internal and external stakeholders. Their number varies from industry to industry and from project to project in terms of type and size. Besides, the project phase also matters.

Internal Stakeholders

This group includes the people within the organization involved in project delivery:

• Project manager,
• Product manager/owner,
• Resource manager,
• Team members,
• C-level executives,
• Company owners,
• Internal sponsors.

External Stakeholders

These are people who can influence or be affected by the project and who don’t belong to the organization initiating the project:

• Consultants,
• Customers,
• End users,
• Government,
• Investors,
• Local communities,
• Media,
• External sponsors,
• Suppliers

Stakeholder engagement will enhance the project sucess in the following ways:

(i) Proper Stakeholder Management Ensures Risk-Free Project Delivery

You can’t eliminate risks at all but with stakeholders engaged, you will significantly increase your success in administering project risks. The absence of interaction with stakeholders or their improper engagement can bring uncertainty to project management. Their needs, statuses, and expectations may change at any moment of project delivery that, in turn, will significantly alter the project structure, terms, schedule, and deliverables. This is why a project manager should keep his/her finger on the pulse when dealing with them and be ready for any kind of uncertainty just in case. A PM should have a trustworthy tool for predicting risks and administering uncertainty.

(ii) Stakeholders Are a Source of Project-Related Knowledge

Theoretically, a project manager should possess industry, product, and a bit of technical knowledge but the reality is that very often they don’t have enough information to compile project requirements and identify constraints. In this case, PMs engage stakeholders, and they share all important project-related data.

(iii) Keeping Stakeholders Engaged Ensures Project Delivery

If your project’s stakeholders are aware of every project detail they’re more likely to help you deliver it on time and within budget. Keep them informed and ask for their opinion. Let them ask questions freely. Do your best to adhere to transparency. In such a way, it’ll be easier for you to influence and change their opinions if you need it.

Therefore, to ensure project success, you as a project manager have to know who they are and to meet them personally to establish cooperation.