Key points
- Revisit hurdle rates and the assumptions behind them.
- Compare projects against each other, not just against a threshold.
- Build options and stage-gates into large investments.
For much of the last decade, cheap capital allowed organisations to fund many projects at once. With higher borrowing costs, that approach no longer works. Leadership teams must choose more carefully, and explain their choices more clearly.
Revisit the hurdle
Hurdle rates set in a different interest-rate environment may no longer reflect the real cost of capital or the risk of each project. Revisiting them is a simple first step.
Compare, don't just approve
Projects are often approved one by one against a threshold. Comparing them side by side, on the same assumptions, reveals which ones truly deserve investment.
The question is not whether a project clears the bar, but whether it is the best use of the money.
Stage the commitment
For large investments, building in stage-gates allows organisations to commit capital in steps, as evidence builds. That protects value when conditions change.
