Sunk cost refers to money, time, or effort that has already been spent on a particular endeavor and that cannot be recovered. Economic principles dictate that sunk costs should not be considered when making decisions about whether to continue one’s present course of action or to divert resources elsewhere.

Let’s take a look at the different ways you can avoid sunk-cost fallacy in your business.

1. #1 Build creative tension.
2. #2 Track your investments and future opportunity costs.
3. #3 Don’t buy in to blind bravado.
4. #4 Let go of your personal attachments to the project.
5. #5 Look ahead to the future.

A sunk cost refers to money that has already been spent and which cannot be recovered. Sunk costs are excluded from future business decisions because the cost will remain the same regardless of the outcome of a decision.

In accounting, finance, and economics, all sunk costs are fixed costs. However, not all fixed costs are considered to be sunk. The defining characteristic of sunk costs is that they cannot be recovered. Individuals and businesses both incur sunk costs

Sunk costs are expended costs. As executives, directors, or managers evaluate whether they should continue “pouring” money into a troubled project, any money spent so far should not influence their decision to stop, suspend, or continue on with the project, because they cannot recover those costs.

Opportunity Cost vs. The difference between an opportunity cost and a sunk cost is the difference between money already spent in the past and potential returns not earned in the future on an investment because the capital was invested elsewhere.

A sunk cost is a cost that an entity has incurred, and which it can no longer recover. Sunk costs should not be considered when making the decision to continue investing in an ongoing project, since these costs cannot be recovered. Instead, only relevant costs should be considered

One of the largest contributors to fishy accounting and sub-optimal financial decision making is debt. This applies to all kinds of debt and whether or not you consider it to be “good debt”. The most important thing to remember is that the debt is a sunk cost

360-Degree Project Management is a full-viewed approach to defining the scope for solutions that are not only successful, but which also deliver expected results. Taking in the landscape through the lenses of Driving Need, we gain a panoramic understanding of what will make our projects truly successful — and why.

What is a Management Reserve? The management reserve is the amount of the project budget reserved for unforeseen work that is within the scope of the project. The project manager adds the management reserve to the cost baseline resulting in the total project budget.

The amount of prospective reserves at a point in time is derived by subtracting the actuarial present value of future valuation premiums from the actuarial present value of the future insurance benefits.

6 Ways to Prevent Cost Overruns

1. Pay a lot of attention to project planning.
2. Check a vendor’s capabilities before hiring.
3. Attempt to stay within the scope that was originally planned.
4. Use good scheduling tools & charts.
5. Make sure the stakeholders in the project are on the same page.
6. Constantly track and measure the progress.

Schedule risk is the likelihood of failing to meet schedule plans and the effect of that failure. It exists in every schedule and is impossible to predict, with complete confidence, the length of time necessary to complete an activity, meet a milestone, or deliver a system

Schedule risk is the potential for a strategy, project or task to take longer than planned. A schedule typically includes forward-looking estimates that are inherently uncertain.

Programmatic Risk: This is the risk associated with action or inaction from outside the project, over which the project manager has no control, but which may have significant impact on the project. These impacts may manifest themselves in terms of technical, cost, and/or schedule.