Legacy costs are current expenditures related to the past that add no value to an organization's business or strategy. Significant legacy costs can impact an organization's competitiveness. They are often related to failed projects, ineffective strategies and years of insufficient funding for important programs such as pensions. In many cases, legacy costs are related to changes in strategy. For example, leadership changes in government can result in legacy costs as the programs of the outgoing government are abandoned.
ExamplesCleaning up environmental damage at a factory site that had leaked chemicals into the ground.Funding a pension that was underfunded for decades.Payments for the debt incurred by failed or discontinued strategies.Payments for debts incurred due to financial mismanagement.Design debt such as poorly designed software and systems.Next: Business Costs
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