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In this video, Professor K explains the importance of developing a statement of work as a project management tool. It outlines work requirements, timelines, project specifics, deliverables, and budgetary information for all parties involved in a pen test. The statement of work is the final document both you and the client agree on before starting work. It defines what work will be done and your responsibilities to the customer, making it the first step in any project. The statement of work includes the scope of work, schedule, and specific details of the project.