Earned Value Challenges in Projects With Different Project and Functional Currencies

摘要

This paper investigates the challenges faced by businesses that perform projects in currencies different than those of their functional currencies. Projects on the African continent are often performed in US Dollars. However, the businesses executing these projects typically do not operate in countries where the functional currency is US Dollars. In addition, these countries often have volatile currencies. This presents various challenges when performing earned value evaluations, which are typically not considered in traditional scenarios where the functional and project currencies are the same. As such, there is limited research available that is based on practical examples. To investigate these challenges, this paper examines a case study project. The project was based in Kenya and was performed both in US Dollars and Kenya Shillings. The company that executed the project was based in South Africa and, as such, had a functional currency of South African Rand. The case study evaluates the effect that the exchange rates of the various currencies had on the earned value evaluation of the project. This paper then proposes a practical solution to the challenges associated with volatile exchange rates by presenting a strategy that can be implemented to mitigate the effects on the earned value of such projects. By applying the proposed solution, more accurate earned value calculations can be made in the functional currency. This results in project reports that add value for both project and business management, and not only for project management.