Capital Risk Rarely Appears Where Boards Expect It

Boards rarely see capital projects lose predictability in execution.

What they see are outcomes: missed returns, extended timelines, additional capital requests, dilution, and lost credibility. By the time these symptoms surface, the conditions that produced them are already deeply embedded and difficult to unwind.

The uncomfortable reality is this: the most consequential capital risks are taken long before capital is formally “at risk.”

They are taken early, quietly, and often without the scrutiny their consequences warrant.

Low Spend Creates a False Sense of Safety

At the front end of a major capital initiative, spending is low and confidence is high. Early studies are funded, options are explored, and initial assumptions take shape. Compared to the eventual authorization, the dollars involved feel immaterial. As a result, governance is light, leadership attention is episodic, and early decisions are allowed to accumulate without being treated as binding commitments.

This is a critical misinterpretation of risk.

Low spend does not mean low exposure. It simply means the exposure has not yet been priced.

Where Value and Risk Are Actually Locked In

During project shaping and early front-end loading, decisions are made that define the project’s economic envelope. Choices around location, scale, technology path, delivery model, and commercial assumptions begin to close options. Even when accepted informally, these decisions narrow future choices and harden assumptions that will later be defended as facts.

By the time a project reaches formal board approval, most of its value, risk profile, and capital exposure have already been determined. At that point, the board is not deciding whether to take risk. It is deciding whether to fund risk that has already been taken.

Execution does not introduce this risk. Execution exposes it.

Execution Reveals Constraints It Did Not Create

When projects enter distress, organizations tend to look downstream for explanations. Construction productivity, contractor performance, supply chain disruption, or execution controls are scrutinized because they are visible, familiar, and feel actionable. But execution teams do not invent constraints. They inherit them.

What execution reveals are the consequences of earlier decisions made before uncertainty was sufficiently reduced: A site that appeared acceptable but was not fully vetted, a technology choice made before operating risks were understood, a scope definition locked before alternatives were fully evaluated, a schedule shaped by optimism rather than evidence.

None of these decisions are reckless in isolation. Taken together, they create commitment risk.

Commitment Risk Is Structurally Different from Execution Risk

Execution risk is manageable. It is measurable, visible, and can be monitored and mitigated. Commitment risk is different. It is created when options are closed before leadership has enough information to justify closing them. It accumulates silently during early phases, often without explicit recognition by senior leadership or the board.

By the time formal approval is requested, changing direction is still possible, but no longer inexpensive. Capital, credibility, and time have already been committed.

Why Better Execution Has Not Restored Predictability

This dynamic explains why predictability remains elusive despite decades of improvement in execution practices. Organizations continue to invest in better tools, more reporting, and tighter controls, yet loss of predictability persists.

You cannot execute your way out of a poorly shaped investment.

Predictability is not created during construction. It is created when uncertainty is deliberately reduced early, when options are explicitly examined rather than implicitly closed, and when leadership insists on maturity before momentum.

Governance as Value Protection, Not Formality

This is where governance must function as a value protection system rather than an approval formality. Effective governance improves decision quality. It forces clarity around what is known, what is assumed, and what remains uncertain. It ensures that progress reflects learning, not just activity.

When governance allows projects to advance without resolving fundamental uncertainties, it does not accelerate value creation. It accelerates value erosion.

Leadership Behavior Is the Primary Performance Multiplier

Ultimately, the strongest determinant of capital project outcomes is leadership behavior. Projects lose predictability not because teams lack tools, but because leaders disengage too early, tolerate unresolved uncertainty, or equate progress with advancement rather than readiness. Clarity must be reinforced continuously. Alignment must be maintained deliberately. If leadership messages are not repeated, they are not retained.

Capital value is rarely destroyed in a single decision or a single moment. It erodes incrementally through early choices that feel reasonable at the time and irreversible later. For capital-constrained organizations, this erosion can be existential. Burned runway, weakened investor confidence, forced dilution, and loss of strategic options are not execution breakdowns. They are the cumulative outcome of early decisions that were never treated as capital commitments.

The Message Boards and Sponsors Cannot Ignore

The core message for boards and sponsors is simple and consequential.

Execution does not destroy value.
It delivers exactly what was shaped upstream.

The biggest capital risks are taken before anyone thinks capital is at risk.
That is where governance, leadership attention, and fiduciary discipline matter most.

—
Cristian Gonzalez
Founder, BPMP Solutions