Cost Benefit Analysis (CBA) NameInstitutionInstructorCourseDate Cost Benefit Analysis (CBA)Cost benefit analysis is an approach used in organizations to research and estimate on the best practices and alternatives that guarantee high benefits while at the same time decreasing the costs associated with the activities (Brent, 2017).
This technique is widely used in financial planning of organizations as the level of costs affect the returns on investments and this aspect matters a lot in planning and projecting future returns (Brent, 2017). Cost benefit analysis provide information, which is useful in the decision-making process by the management of organizations. For organizations to increase their returns and be successful in their investments, they should incorporate the aspect of cost benefit analysis (Brent, 2017). Benefits of Cost Benefit Analysis (CBA) As a Public Management TechniqueThe benefits of cost benefit analysis include conducting an evaluation of the risks and providing information on the advantages of undertaking a certain project (Brent, 2017). The risks include the disadvantages, which may involve the costs associated with undertaking the project. This information is important in making a decision on whether to carry on with the project or to drop the project (Brent, 2017). Comparisons are done, and if the benefits are more that the costs, the project may be considered a good choice. Public organizations must use precise and accurate strategies as venturing in a project where there is an uncertainty of the benefits is a risky business venture which may negatively impact the organization (Brent, 2017).
Cost benefit analysis helps an organization in budget planning. Budgets are prepared in relation to the projected returns and cost benefit analysis provides information, which can be helpful in the budget planning (Brent, 2017). Shortcomings of Cost Benefit Analysis (CBA) As a Public Management TechniqueSome of the limitations of cost benefit analysis include that the technique cannot be a hundred percent relied on as an efficient tool in projecting returns as well as the risks involved (Keating & Keating, 2017). This is because the data collected may involve a sample population, which may not give an accurate analysis of the projections, and the risks expected. Cost benefit analysis may not be effective on organizations dealing with non-monetary services, which may include education or healthcare delivery (Keating & Keating, 2017). This is a limitation on its use on these organizations and other analysis tools should be incorporated in these situations to increase efficiency (Keating & Keating, 2017). Another disadvantage in using cost benefit analysis includes the probability of inaccurate predictions, which may lead to negative results. For the cost benefit analysis to work effectively, it must identify correct benefits and costs without error.
Errors may lead to inaccurate analysis, which can lead to increased risk or limited benefits (Keating & Keating, 2017). An Example That You Could Use In Your Area of Professional Interest An example of cost benefit analysis in the healthcare sector can include an analysis whether a certain healthcare intervention may be successful and produce the desired results with minimal costs associated with the implementation of the program (Neumann et al., 2017). This will include the benefits of the program to patients compared to the cost of implementing the program. A cost benefit analysis will involve grouping the patients using different age groups to enable easy calculations on the benefits of the program on the patients (Neumann et al., 2017).
The groups can involve children, young adults, and older individuals. The cost of the program will also be calculated using a certain life period of the different age groups with a determined expected life expectancy. Information provided will determine if the program will be implemented or not (Neumann et al., 2017).
ReferencesBrent, R. J. (2017). Advanced introduction to cost-benefit analysis. Cheltenham, UK: Edward Elgar Publishing.Keating, B.
, & Keating, M. O. (2017). Basic cost benefit analysis for assessing local public projects. New York, NY: Business Expert Press.Neumann, P. J.
, Sanders, G. D., Russell, L.
B., Siegel, J. E., Ganiats, T. G.
, & Oxford University Press. (2017). Cost-effectiveness in health and medicine. New York: Oxford University Press.