You are evaluating a proposed investment in a mid-sized card issuer's rewards servicing platform after customer service costs rose and digital redemption conversion stalled. The project would automate servicing workflows and improve redemption UX, but it requires an upfront build and ongoing maintenance. Your CFO wants a go/no-go recommendation now because the budget must be locked before next year's planning cycle, and you need to weigh expected financial return against execution risk.
| Metric | Value |
|---|---|
| Upfront implementation cost (Year 0) | $8,000,000 |
| Annual platform maintenance cost (Years 1-5) | $1,200,000 |
| Annual customer service cost savings (Years 1-5) | $3,400,000 |
| Annual incremental interchange gross profit from higher redemption engagement (Years 1-5) | $2,100,000 |
| Annual fraud loss reduction (Years 1-5) | $700,000 |
| Probability of full benefit case | 60% |
| Probability of downside case | 40% |
| Downside case: realized annual benefits vs. plan | 70% |
| Discount rate | 10% |
| Project life | 5 years |
How would you decide whether to approve this investment, and what is your recommendation based on the expected return and downside sensitivity?
Build a probability-weighted investment caseSeparate gross benefits from net cash flowDiscount multi-year cash flows correctlyMake a clear go/no-go recommendation under downside risk