Project reports are built on assumptions. Whether related to demand, pricing, costs, timelines, regulatory behavior, or execution capability, assumptions form the invisible scaffolding on which feasibility, risk assessment, and financial projections rest. The challenge is not whether assumptions should exist, they are unavoidable, but how far they should be allowed to influence outcomes, and whether their use crosses an ethical boundary.
This question becomes particularly relevant in early-stage projects, where data is incomplete, markets are evolving, and decisions must still be made. At that point, assumptions are not merely technical inputs; they shape risk perception, influence capital allocation, and often determine whether a project proceeds at all.
This article examines the tension between practical necessity and ethical responsibility in the use of assumptions within project risk assessment.
Why Assumptions are Unavoidable in Early-Stage Projects
In greenfield ventures, expansions into new markets, or first-of-a-kind projects, decision-makers rarely have the comfort of complete information. Historical data may be irrelevant, benchmarks may not be directly comparable, and future conditions may depend on policy, technology adoption, or competitive behavior that is yet to unfold.
In such contexts, assumptions serve a functional purpose. They allow planners to create a coherent framework to evaluate viability, stress outcomes, and compare alternatives. Without assumptions, project reports would stall at the point of uncertainty, rendering structured decision-making impossible.
In this sense, assumptions are not a weakness of project reports. They are a mechanism to move from ambiguity to structured analysis.
Not all Assumptions Carry the Same Risk
The ethical and analytical risk does not stem from the presence of assumptions, but from their nature and treatment.
Some assumptions are grounded in observable evidence. These may include inflation ranges derived from recent trends, productivity benchmarks observed in comparable operations, or demand growth aligned with established sector data. While still uncertain, such assumptions are anchored in reality and can be tested with reasonable confidence.
Others are inherently speculative. Examples include aggressive market share capture in competitive markets, optimistic ramp-up timelines without execution precedent, or favorable regulatory outcomes assumed without supporting policy signals. These assumptions introduce a higher degree of uncertainty and materially influence risk assessment outcomes.
The problem arises when speculative assumptions are presented with the same confidence as evidence-based ones, without clearly communicating their fragility or downside implications.
The Ethical Responsibility of Transparency
From an ethical standpoint, the primary obligation of a consultant or report preparer is not to eliminate assumptions, but to ensure transparency about their role and impact.
Risk assessment loses integrity when assumptions are embedded deep within models but not surfaced explicitly in the narrative. Stakeholders may then interpret projections as objective forecasts rather than conditional outcomes dependent on specific assumptions holding true.
This becomes particularly problematic in capital-intensive projects, infrastructure developments, or debt-funded ventures, where understated risk can lead to long-term financial stress. Ethical practice demands that assumptions be disclosed clearly, their rationale explained, and their sensitivity demonstrated.
Scenario-based presentation, base case, downside case, and stress case, is not merely a technical best practice. It is a disclosure mechanism that respects the decision-maker’s right to understand uncertainty.
When Assumptions Start Replacing Risk Analysis
A more serious concern emerges when assumptions are used not to assess risk, but to neutralize it. This happens when optimistic assumptions are layered to offset visible risks, resulting in projections that appear robust but are structurally fragile.
At this point, assumptions cease to be analytical tools and become narrative devices. The risk is not only analytical failure but erosion of trust, between consultants and clients, promoters and investors, and ultimately between forecasts and outcomes.
History offers multiple reminders that excessive optimism, unsupported by data and insufficiently stress-tested, can have material consequences. While not every failed project is unethical, consistently downplaying uncertainty through favorable assumptions raises legitimate questions about professional responsibility.
The Counter-Argument: Assumptions Enable Strategic Action
There is, however, a valid counter-view. In fast-moving sectors such as technology, renewable energy, or emerging consumer markets, waiting for perfect information is often not an option. Strategic advantage may depend on acting early, despite uncertainty.
In such environments, assumptions enable calculated risk-taking. They allow businesses to explore opportunity space, allocate capital incrementally, and refine strategy as data emerges. The ethical issue, therefore, is not the use of assumptions, but whether they are treated as provisional and revisable rather than definitive truths.
A more Responsible Way Forward
The debate is not about choosing between assumptions and certainty. It is about discipline in how assumptions are framed, tested, and communicated.
Responsible practice includes explicitly separating facts from assumptions, quantifying sensitivity wherever possible, and revisiting assumptions as the project progresses. It also involves resisting pressure, commercial or otherwise, to stretch assumptions merely to make a project appear viable.
In this framework, assumptions become instruments of insight rather than sources of distortion.
Assumptions in project risk assessment are neither inherently unethical nor inherently benign. They are powerful tools that shape perception, influence decisions, and allocate risk. Their ethical standing depends entirely on how they are used.
When assumptions are transparent, evidence-informed, stress-tested, and openly discussed, they serve their intended purpose. When they are concealed, overstated, or used to mask uncertainty, they undermine the integrity of the very decisions they are meant to support.
For decision-makers, the most important question is not whether a project report contains assumptions, but whether it communicates risk honestly, and whether it equips them to decide with eyes open rather than confidence borrowed from fragile forecasts.
How Hmsa can Help
Hmsa Consultancy supports clients by bringing discipline, transparency, and realism to assumption-led project evaluations. We help promoters, lenders, and investors clearly distinguish between data-backed inputs and judgment-based assumptions, quantify downside risks through structured sensitivity and scenario analysis, and ensure that feasibility conclusions are decision-ready rather than optimism-driven. Our approach focuses on enabling informed choices, by stress-testing business models, explicitly surfacing key assumptions, and communicating risks in a manner that withstands scrutiny from banks, investors, and internal boards alike.
