Financial Due Diligence of SEPD submissions to DPI …€¦ · Web viewWe have undertaken a...
Transcript of Financial Due Diligence of SEPD submissions to DPI …€¦ · Web viewWe have undertaken a...
[Applicant Name]
[Address]
ABN: [Insert applicant ABN number]
[Insert Applicant Logo]
Prepared by:
[Name of Independent Assessor]
[Membership No.]
[Insert Date]
Prepared for:
Department of Sustainability, Environment, Water, Population and Communities
Financial Viability Assessment:
Voluntary Product Stewardship
[Applicant Name]
Commercial-In-Confidence
Contents
1. Executive Summary....................................................................................................................................4
2. Scope of Report..........................................................................................................................................6
3. Background.................................................................................................................................................9
3.1 Overview.........................................................................................................................................9
3.2 Proposed Arrangement...................................................................................................................9
3.3 Stakeholder Chart...........................................................................................................................9
3.4 Key Stakeholders and Counterparties.............................................................................................9
4. Funding and Capital..................................................................................................................................11
4.1 Summary of Funding.....................................................................................................................11
4.2 Funding Analysis...........................................................................................................................12
4.3 Key Issues and Considerations......................................................................................................12
4.4 Assessment of Funding and Capital..............................................................................................12
5. Applicant Viability.....................................................................................................................................14
5.1 Applicant Viability.........................................................................................................................14
5.2 Financial Metrics...........................................................................................................................15
5.3 Key Issues and Considerations......................................................................................................16
5.4 Applicant Viability Assessment.....................................................................................................16
6. Underlying Assumptions...........................................................................................................................18
6.1 Overview of Key Assumptions.......................................................................................................18
6.2 Additional Costs and Contingencies..............................................................................................19
6.3 Key Issues and Considerations......................................................................................................19
6.4 Assessment of Underlying Assumptions.......................................................................................19
7. Arrangement Viability...............................................................................................................................21
7.1 Commercial Review......................................................................................................................21
7.2 Projected membership.................................................................................................................21
7.3 Cash flow Analysis.........................................................................................................................22
7.4 Scenario Analysis..........................................................................................................................23
7.5 Break-Even Analysis......................................................................................................................24
7.6 Key Issues and Considerations......................................................................................................24
7.7 Arrangement Viability Assessment...............................................................................................24
8. Adaptive Management Framework..........................................................................................................26
8.1 Adaptive Management Framework..............................................................................................26
8.2 Key Issues and Considerations......................................................................................................26
8.3 Assessment of Adaptive Management Framework......................................................................26
Commercial in Confidence 2
Commercial-In-Confidence
9. Risk Management and Corporate Governance.........................................................................................27
9.1 Applicant Risk Management.........................................................................................................27
9.2 Arrangement Risk Management...................................................................................................27
9.3 Summary of Key Risk Management Items....................................................................................27
9.4 Corporate Governance.................................................................................................................27
9.5 Key Issues and Considerations......................................................................................................27
9.6 Assessment of Risk Management and Corporate Governance.....................................................27
10. Information Sources and Supporting Documentation..........................................................................27
10.1 Information Sources......................................................................................................................27
10.2 Request for Additional Information / Clarification........................................................................27
11. Appendices...........................................................................................................................................27
Commercial in Confidence 3
Commercial-In-Confidence
1. Executive Summary
[Applicant Name]
[General background of applicant and the arrangement they are proposing.]
Key Findings and Considerations [Basis of applicant’s revenue assumptions] [Basis of applicant’s cost assumptions] [Key risks to the proposed arrangement] [Applicant viability] [Arrangement funding, viability and break-even level] [Adequacy of adaptive management framework] [Adequacy of risk management and corporate governance frameworks]
The proposed arrangement includes an expected cost budget of [$xxx/metric unit] after including additional costs and the realisation of this budget is dependent upon the following:
Achieving [xxx metric units] per annum
Professional OpinionIn our professional opinion, [Applicant Name]’s application [appears / does not appear] to demonstrate the proposed arrangement will have adequate financial arrangements and funding to achieve the outcomes and requirements of the Product Stewardship 2011 (the Act), the Product Stewardship Regulation 2012 (the Regulation) and the Product Stewardship (Voluntary Arrangements) Instrument 2012 (the Instrument).
Our assessment of each respective risk category would indicate a Risk Effect, Risk Likelihood and overall Risk Magnitude as summarised in the table below:
Risk Category Risk Effect Risk Likelihood Overall Risk Magnitude
Funding and Capital [Colour code]
Commercial in Confidence 4
Commercial-In-Confidence
The Risk Effect, Risk Likelihood and Risk Magnitude have been assigned in accordance with the classification matrices outlined within the Section “V. Risk Allocation Guidelines” of the Department Financial Viability Assessment Guide.
Funding and CapitalThe applicant’s funding and capital was reviewed and in our opinion [the applicant has demonstrated adequate funding and capital to achieve the outcomes and requirements of the Act, the Regulation and the Instrument / the applicant does not appear to have demonstrated adequate funding given that total funding facilities amount to [x] which are inadequate in meeting total projected costs (less projected revenues) / although the applicant appears to have demonstrated an appropriate level of funding, the ability to secure adequate funds is contingent upon the following factors: ….. ]
Applicant ViabilityWe have undertaken a qualitative and a quantitative review of [Applicant Name]’s financial viability and in our opinion, the applicant will [be / not be / is likely to be] financially viable, [however is dependent upon…]. On the basis of [management’s financial projections for the year ending 30 June 2013 / financial statements for the year ended 30 June 2012], in our opinion, the entity has an [indicative conditional] rating of [x], with a credit quality classification of [x] and a [x] level of risk
Underlying AssumptionsWe have reviewed the underlying assumptions that underpin the financial projections provided and from our assessment of the supporting evidence, references and rationale, [our opinion is that the underlying assumptions appear reasonable / our opinion is that the underlying assumptions do not appear reasonable / although some of the assumptions appear reasonable, we are unable to determine the reasonableness of a number of underlying assumptions due to there being limited evidence provided]. [Revenue and cost assumptions were all well supported with documentary evidence / No evidence was provided as to support revenue and cost assumptions / Some but not all evidence was provided to substantiate revenue and cost assumptions / Limited evidence was provided to support many of these assumptions, the applicant’s experience is acknowledged].
Arrangement ViabilityWe have undertaken a qualitative commercial review of the arrangement and a quantitative review of the financial projections provided, and [it would appear the arrangement will be viable / it would appear that the arrangement will not be viable] on the basis of the assumptions provided by the applicant [/ although the arrangement appears viable on the basis on underlying assumptions, there are a number of contingencies with a high risk likelihood that would materially impair the overall viability of the arrangement].
Adaptive Management FrameworkWe have reviewed the applicant’s Adaptive Management Framework and in our opinion the arrangement [has in place adequate processes, procedures and plans to address and accommodate for deviations from target levels and has addressed the issues of undersupply and oversupply / does not appear to have adequate processes, procedures and plans to address and does not accommodate for deviations from target levels and/or addressed the issues of undersupply and oversupply / has in place some processes, procedures and plans to address and accommodate for deviations from target levels and the issues of undersupply and oversupply, but has inadequate processes, procedures and plans in the following areas… ].
Risk Management and Corporate GovernanceWe have also undertaken a review of the applicant’s Risk Management and Corporate Governance frameworks and from our review of the documentation submitted the applicant appears to [have adequate risk management, contingency planning and corporate governance frameworks / does not appear to have an established risk management framework and has not demonstrated the adoption of any principles of good corporate governance / have basic frameworks in place with limited processes and protocols to address a Commercial in Confidence 5
Commercial-In-Confidence
2. Scope of Report
The purpose of this Investigation is to provide an assessment as to whether the application and proposed Voluntary Product Stewardship Arrangement (“the arrangement”) submitted by [Applicant Name], sufficiently demonstrates that the proposed arrangement will have adequate financial arrangements and funding to achieve the outcomes and requirements of the Act , the Regulation and the Instrument.
We have conducted this assessment on the basis of the information provided to us by [Applicant Name] and from our own enquiries. The key scope considerations are outlined below:
Scope
Applicant Participation [Statement outlining applicant’s level of participation]
Conflict of Interest
[Summary of all actual, potential or perceived conflicts of interest which may have arisen at any stage throughout the engagement]
This Report and the information contained herewith is for the exclusive and internal use of Department of Sustainability, Environment, Water, Population and Communities (the department) and shall not be disclosed to any other person or entity without written consent from [Assessor Name]. The report should be taken as a whole and cannot be abridged or excerpted for any reason. This report should be read within the context of the department’s Financial Viability Assessment Guide.
Commercial in Confidence 6
Commercial-In-Confidence
Financial Assessor’s Declaration
Assessor EligibilityAs the Independent Assessor appointed for this engagement, [Assessor Name] confirms that all eligibility criteria and requirements specified in “II. Independent Assessor Eligibility Criteria” were met and continued to be met throughout the course of this assessment. We confirm there have been no subsequent matters that would otherwise impair our actual or perceived objectivity or capability in providing an independent professional opinion in relation to the applicant’s proposed arrangement and submission.
Detailed ReviewOn the basis of the information provided by [Applicant Name], we confirm we have completed a detailed review in determining whether the applicant has sufficiently demonstrated that the proposed arrangement will have adequate financial arrangements and funding to achieve the outcomes and requirements of the Act, the Regulation and the Instrument. We confirm we have conducted this assessment in accordance with the prescribed guidelines outlined within the “Financial Viability Assessment Guide for Voluntary Product Stewardship Arrangements”.
Analytical ProceduresWe confirm we have applied appropriate audit and verification procedures, evidence-based analysis and accounting expertise in the collection, classification and assessment of the proposed arrangement. While we have not conducted an audit, and no such assurance is expressed, we have applied analytical, verification, validation and other procedures as outlined within the department’s guidelines.
Prospective InformationProspective financial information relates to events and actions that have not yet occurred and may not occur. While evidence may be available to support underlying data and assumptions upon which prospective financial information is predicated, forward looking projections are subject to market changes and are less certain in nature. While [Assessor Name] have taken reasonable steps to verify the reliability of the information and have applied professional judgement in assessing the proposed arrangement, we make no assertion as to whether the projections and outcomes will be achieved.
Professional ConductIn conducting the review, to the best of our knowledge and belief, [Assessor Name], its staff and delegates have complied with all applicable independence requirements of the Australian accounting profession and applicable code of professional conduct. Throughout the course of the engagement, we collected evidence to obtain reasonable assurance that the information appeared free of material misstatement. Where the information was based on significant assumptions and estimates, we confirm we have applied the principles of materiality and conservatism. We have sought to apply our professional judgement in a way that neither overstates nor understates the affairs of the arrangement. We confirm that an engagement letter was duly signed prior to accepting the engagement, and that all assessment fees were paid in full and in advance prior to the commencement of this assessment.
[Financial Assessor Name][Address]
Signed ............................[Name of Representative]....... / ....... / 2013
Commercial in Confidence 7
Commercial-In-Confidence
Applicant’s UndertakingApplicant Responsibility[Applicant Name] confirms that it has taken reasonable steps to ensure the accuracy, integrity and completeness of the information provided to the department and the assessor in support of its application. This includes verifying the underlying estimates, projections and assumptions relating to the arrangement. The applicant acknowledges the department and the assessor will rely upon the information provided for the purposes of conducting the commercial and financial viability assessment. [Applicant Name] also confirms it has obtained its own legal and commercial advice to ensure the proposed financial arrangements and affairs are appropriate for the purposes of achieving the outcomes and requirements of the Act, the Regulation and the Instrument.
Applicant ParticipationThe applicant confirms it has duly authorised the Department and the assessor to carry out any and all investigations as required to assess the financial arrangements and funding are appropriate for achieving the outcomes and requirements of the Act. The applicant confirms the department and the assessor may make enquiries of any person or persons regarding the information provided by the applicant, information from any source relating to the applicant, and/or the performance and financial standing of the applicant. This may include company searches, mercantile credit references, bank references, trade references and other referee reports.
The department reserves the right to conduct its own investigations and to examine the resources of the arrangement and any related party. The applicant acknowledges the department may seek additional information in respect of any aspect of the submission at any time, including a request for the department or its own advisors to visit the offices and/or facilities of the applicant and related parties to clarify and/or verify attributes of the proposed arrangement. The applicant agrees to facilitate such meetings as required. The applicant confirms it has made and will continue to make available to the department and the assessor all necessary information and documentation in relation to its application. The applicant confirms that it maintains adequate commercial and financial records and that it will provide such records promptly to the department and assessor as required.
Information UpdatesThe applicant acknowledges they have a duty and obligation to advise the department of any change in any circumstance that may be material to the commercial and financial viability of the proposed arrangement. This includes but is not limited to: changes in ownership of the applicant and key stakeholders; changes of management, financial or operational control (such as directors and key technical personnel); any convictions for breaches of legislation or statutory obligations; changes in financial status including administration and insolvency.
The director and/or an appropriate representative of the applicant must sign the following declaration, confirming they have read, understood and duly agreed to these terms for the purposes of the application.
[Applicant Name][Address]
Signed ............................
[Name of Representative]
Commercial in Confidence 8
Commercial-In-Confidence
....... / ....... / 2013
3. Background
3.1 Overview
Subject Name [Applicant Name]
ABN [ABN number]
Type of Entity [Public company / Private company / Not-for-profit entity / Unit trust /
Discretionary trust]
Head Office Address [Entity address]
Contact Details [Key contact]
Tel:
Fax:
Email:
History [Applicant’s history]
Board of Directors Director Name 1, Title, [Short paragraph outlining director profile]
Director Name 2, Title, [Short paragraph outlining director profile]
Director Name 3, Title, [Short paragraph outlining director profile]
3.2 Proposed Arrangement
[Overview of the applicant’s proposed arrangement]
3.3 Stakeholder Chart
[Insert relationship chart of all key stakeholders and counterparties to the arrangement]
3.4 Key Stakeholders and Counterparties
The key arrangements in place together with the relevant stakeholders and other counterparties were identified are as follows:
Commercial in Confidence 9
Commercial-In-Confidence
Stakeholder Arrangement Status and references
Stakeholder #1 [Description of arrangement] [Description of current status of arrangement]
Supporting evidence and/or references:[List supporting evidence and/or references]
Stakeholder #2 [Description of arrangement] [Description of current status of arrangement]
Supporting evidence and/or references:[List supporting evidence and/or references]
Counterparty #1 [Description of arrangement] [Description of current status of arrangement]
Supporting evidence and/or references:[List supporting evidence and/or references]
Counterparty #2 [Description of arrangement] [Description of current status of arrangement]
Supporting evidence and/or references:[List supporting evidence and/or references]
Commercial in Confidence 10
Commercial-In-Confidence
4. Funding and Capital
4.1 Summary of Funding
Summary of Funding2011/12 2012/13 2013/14 Total
Initial Capital
Applicant contribution (cash)
Applicant contribution (in-kind)
Other contributions
Contributor Name 1 (cash)
Contributor Name 2 (cash)
Contributor Name 1 (in-kind)
Contributor Name 2 (in-kind)
Other Commonwealth Funding
Total Initial Capital
External Funding Facilities
Type of Facility 1 ($ Limit)
Type of Facility 2 ($ Limit)
Type of Facility 3 ($ Limit)
Total External Funding
Committed Ongoing Funding
Related party #1
Related party #2
Equity Investor #1
Equity Investor #2
Total Committed Funding
Conditional Funding
Related party #1
Related party #2
External financier
Equity Investor
Commercial in Confidence 11
Commercial-In-Confidence
Total Conditional Funding
4.2 Funding Analysis
Funding AnalysisInitial Funding [Commentary on initial funding and seed capital]
External Funding Facilities [Commentary on initial funding and seed capital]
Committed Ongoing Funding [Commentary on ongoing funding]
Conditional Funding [Commentary on external funding facilities]
4.3 Key Issues and Considerations
4.4 Assessment of Funding and Capital
Assessment of Funding and Capital
Risk Effect Description
[Assessed Risk Effect classification]
[Risk Effect Description that corresponds to the assessed Risk Effect classification as per the Risk Effect table]
Risk Likelihood Description
[Assessed Risk Likelihood classification]
[Risk Likelihood Description that corresponds to the assessed Risk Likelihood classification as per the Risk Likelihood table]
Risk Category Risk Effect Risk Likelihood Overall Risk Magnitude
Funding and Capital [Assessed Risk Effect classification]
[Assessed Risk Likelihood classification]
[Derived Overall Risk Magnitude]*To be colour coded as per the defined traffic
Commercial in Confidence 12
Commercial-In-Confidence
light reporting system
The applicant’s funding and capital was reviewed and in our opinion [the applicant has demonstrated adequate funding and capital to achieve the outcomes and requirements of the Act, the Regulation and the Instrument / the applicant does not appear to have demonstrated adequate funding given that total funding facilities amount to [x] which are inadequate in meeting total projected costs (less projected revenues) / although the applicant appears to have demonstrated an appropriate level of funding, the ability to secure adequate funds is contingent upon the following factors: ….. ]
Recommendations:
Commercial in Confidence 13
Commercial-In-Confidence
5. Applicant Viability
5.1 Applicant Viability
Applicant ViabilityApplicant History [Commentary on applicant history]
Management Capabilities [Commentary on management capabilities]
Financial & Management Policies
[Commentary on financial and management policies]
Financial Statements [Commentary on financial statements]
Trading Performance [Commentary on trading performance]
Capitalisation [Commentary on capitalisation]
Liquidity [Commentary on liquidity]
Financial Structure [Commentary on financial structure]
Operational Dependencies [Commentary on operation dependencies]
Future Outlook [Commentary on future outlook]
Assessed Credit Quality and Credit Rating
[Commentary on credit quality and credit rating]
Commercial in Confidence 14
Commercial-In-Confidence
5.2 Financial Metrics
Financial MetricsJun 2011
'000Jun 2012
'000Nov 2012
'000
Profitability
Gross Profit Margin %
Net Profit Margin %
Profitability %
Reinvestment %
Return on Assets %
Return on Equity %
Liquidity
Working Capital $ ,000
Working Capital to Sales %
Cash Flow Coverage %
Cash Ratio %
Current Ratio x
Quick Ratio x
Capital Adequacy %
Gearing
Net Tangible Worth $ ,000
Net Asset Backing %
Gearing %
Debt to Equity x
Interest Coverage x
Repayment Capability %
Financial Leverage x
Short Ratio %
Operating
Operating Leverage x
Creditor Exposure %
Creditor Days days
Inventory Days days
Debtor Days days
Cash Conversion Cycle days
Commercial in Confidence 15
Commercial-In-Confidence
Other Indicators
Sales (Annualised) $ ,000
Activity x
Sales Growth %
Sustainable Growth %
Dividend Payout %
Related Party Loans Receivable %
Related Party Loans Payable %
Related Party Loans Dependency
%
Quick Asset Composition %
Current Asset Composition %
Current Liability Composition %
Z-Score Risk Measure
5.3 Key Issues and Considerations
5.4 Applicant Viability Assessment
Assessment of Applicant Viability
Risk Effect Description
[Assessed Risk Effect classification]
[Risk Effect Description that corresponds to the assessed Risk Effect classification as per the Risk Effect table]
Risk Likelihood Description
[Assessed Risk Likelihood classification]
[Risk Likelihood Description that corresponds to the assessed Risk Likelihood classification as per the Risk Likelihood table]
Risk Category Risk Effect Risk Likelihood Overall Risk Magnitude
Applicant Viability [Assessed Risk Effect classification]
[Assessed Risk Likelihood classification]
[Derived Overall Risk Magnitude]*To be colour coded as per the defined traffic light reporting system
Commercial in Confidence 16
Commercial-In-Confidence
We have undertaken a qualitative and a quantitative review of [Applicant Name]’s financial viability and in our opinion, the applicant will [be / not be / is likely to be] financially viable, [however is dependent upon…]. On the basis of [management’s financial projections for the year ending 30 June 2013 / financial statements for the year ended 30 June 2012], in our opinion, the entity has an [indicative conditional] rating of [x], with a credit quality classification of [x] and a [x] level of risk.
Recommendations:
Commercial in Confidence 17
Commercial-In-Confidence
6. Underlying Assumptions
6.1 Overview of Key Assumptions
Key Assumption Description / Approach Supporting Evidence and/or References Provided
Revenue
(i) Revenue Source #1
$xx/ unit metricCalculated by:
[Description / approach] [Supporting evidence and/or references]
(ii) Revenue Source #2
$xx/ unit metricCalculated by:
[Description / approach]
Cost Assumptions
(i) Cost Item 1 of $xx/ unit metric
[Description / approach]
(ii) Cost Item 1 of $xx/ unit metric
[Description / approach]
(iii) Cost Item 3 of $xx/ unit metric
[Description / approach]
(iv) Cost Item 1 of $xx/ unit metric
[Description / approach]
(v) Overheads / Operating expenses
[Include detailed listing]000’s
Overhead Item 1 $ Overhead Item 2 $
Overhead Item 3 $…. $
… $.. $
. $_______
Commercial in Confidence 18
Commercial-In-Confidence
Total $
Commentary on Underlying Assumptions
[Commentary on underlying assumptions]
6.2 Additional Costs and Contingencies
Item Description / Approach
(i) Additional / Unaccounted costs
[Description / approach]
(ii) Contingencies [Description / approach]
Commentary on Additional Costs and Contingencies
[Commentary on additional costs and contingencies]
6.3 Key Issues and Considerations
6.4 Assessment of Underlying Assumptions
Assessment of Underlying Assumptions
Risk Effect Description
[Assessed Risk Effect classification]
[Risk Effect Description that corresponds to the assessed Risk Effect classification as per the Risk Effect table]
Risk Likelihood Description
[Assessed Risk Likelihood classification]
[Risk Likelihood Description that corresponds to the assessed Risk Likelihood classification as per the Risk Likelihood table]
Risk Category Risk Effect Risk Likelihood Overall Risk Magnitude
Underlying Assumptions [Assessed Risk Effect classification]
[Assessed Risk Likelihood classification]
[Derived Overall Risk Magnitude]
Commercial in Confidence 19
Commercial-In-Confidence
*To be colour coded as per the defined traffic light reporting system
We have reviewed the underlying assumptions that underpin the financial projections provided and from our assessment of the supporting evidence, references and rationale, [our opinion is that the underlying assumptions appear reasonable / our opinion is that the underlying assumptions do not appear reasonable / although some of the assumptions appear reasonable, we are unable to determine the reasonableness of a number of underlying assumptions due to there being limited evidence provided]. [Revenue and cost assumptions were all well supported with documentary evidence / No evidence was provided as to support revenue and cost assumptions / Some but not all evidence was provided to substantiate revenue and cost assumptions / Limited evidence was provided to support many of these assumptions, the applicant’s experience is acknowledged]
Recommendations:
Commercial in Confidence 20
Commercial-In-Confidence
7. Arrangement Viability
7.1 Commercial Review
Commercial ReviewCapability and Competency [Commentary on capability and competency]
Key Contractual Arrangements and Documentation
[Commentary on key contractual arrangements and documentation]
Performance Requirements, Milestones and Service Level Agreements
[Commentary on performance requirements, milestones and service level agreements]
Termination Clauses and Liquidated Damages
[Commentary on termination clauses and liquidated damages]
7.2 Projected membership
Member Name ABN Product Type Volume Estimates
Sign-up Status
[Name of member] [ABN number] [Product type] [x metric unit] [Commentary on current status]
Supporting evidence and/or references:
[Reference supporting evidence and/or
references sighted]
Commercial in Confidence 21
Commercial-In-Confidence
Commentary on Projected Membership
[Commentary on Projected Membership]
7.3 Cash flow Analysis
Cash flow Analysis2013 2014 2015 2016 2017 Total
Cash Revenues
Revenue Source #1
Revenue Source #2
Cash Disbursements
Cost item #1
Cost item #2
Cost item #3
Cost item #4
Cost item #5
Cost item #6
Cost item #7
Cost item #8
Cost item #9
Cost item #10
Overheads
Net Operating Cash flow
Net Investing Cash flow
Net Financing Cash flow
Op Cash bal.
Cl. Cash bal
Commentary on Cash Flow Analysis
[Commentary on cash flow analysis]
Commercial in Confidence 22
Commercial-In-Confidence
7.4 Scenario Analysis
Scenario Assumptions / Penetration
Type Volume
Scenario 1 [Key assumption(s)] [Context] [xxx metric unit]
Scenario 2 [Key assumption(s)] [Context] [xxx metric unit]
Scenario 3 [Key assumption(s)] [Context] [xxx metric unit]
Scenario 4 [Key assumption(s)] [Context] [xxx metric unit]
Financial Impact of Modelled Scenarios
Type Assumption2013 (f) 2013 (f) 2013 (f) 2013 (f)
Scenario 1X% Segment AX% Segment B
Scenario 2X% Segment AX% Segment B
Scenario 3X% Segment AX% Segment B
Scenario 4X% Segment AX% Segment B
Revenue Assumptions
Revenue Source #1
Revenue Source #2
Total Revenue
Cost Assumptions
Key Cost Item #1
Key Cost Item #2
Key Cost Item #3
Key Cost Item #4
Overheads
Total Cost
Cost/metric unit
Operating Profit
(f): Forecast
Note. The above table is to be repeated for each forward looking year of the applicant’s financial projections.
Commentary on Scenario Analysis
Commercial in Confidence 23
Commercial-In-Confidence
[Commentary on scenario analysis]
7.5 Break-Even Analysis
Determined Break-Even level
Break-Even Cost Break-Even Volume Break-Even Price
Commentary on Break-Even Analysis
[Commentary on Break-Even Analysis]
7.6 Key Issues and Considerations
7.7 Arrangement Viability Assessment
Assessment of Arrangement Viability
Risk Effect Description
[Assessed Risk Effect classification]
[Risk Effect Description that corresponds to the assessed Risk Effect classification as per the Risk Effect table]
Risk Likelihood Description
[Assessed Risk Likelihood classification]
[Risk Likelihood Description that corresponds to the assessed Risk Likelihood classification as per the Risk Likelihood table]
Risk Category Risk Effect Risk Likelihood Overall Risk Magnitude
Arrangement Viability [Assessed Risk Effect classification]
[Assessed Risk Likelihood classification]
[Derived Overall Risk Magnitude]*To be colour coded as per the defined traffic light reporting system
We have undertaken a qualitative commercial review of the arrangement and a quantitative review of the financial projections provided, and [it would appear the arrangement will be viable / it would appear that
Commercial in Confidence 24
Commercial-In-Confidence
the arrangement will not be viable] on the basis of the assumptions provided by the applicant [/ although the arrangement appears viable on the basis on underlying assumptions, there are a number of contingencies with a high risk likelihood that would materially impair the overall viability of the arrangement].Recommendations:
Commercial in Confidence 25
Commercial-In-Confidence
8. Adaptive Management Framework
8.1 Adaptive Management Framework
Adaptive Management FrameworkDemand Management [Commentary on demand management]
Contingency Planning [Commentary on contingency planning]
Exit Protocols [Commentary on exit protocols]
8.2 Key Issues and Considerations
8.3 Assessment of Adaptive Management Framework
Assessment of Adaptive Management Framework
Risk Effect Description
[Assessed Risk Effect classification]
[Risk Effect Description that corresponds to the assessed Risk Effect classification as per the Risk Effect table]
Risk Likelihood Description
[Assessed Risk Likelihood classification]
[Risk Likelihood Description that corresponds to the assessed Risk Likelihood classification as per the Risk Likelihood table]
Risk Category Risk Effect Risk Likelihood Overall Risk Magnitude
Adaptive Management Framework
[Assessed Risk Effect classification]
[Assessed Risk Likelihood classification]
[Derived Overall Risk Magnitude]*To be colour coded as per the defined traffic light reporting system
Commercial in Confidence 26
Commercial-In-Confidence
We have reviewed the applicant’s Adaptive Management Framework and in our opinion the arrangement [has in place adequate processes, procedures and plans to address and accommodate for deviations from target levels and has addressed the issues of undersupply and oversupply / does not appear to have adequate processes, procedures and plans to address and does not accommodate for deviations from target levels and/or addressed the issues of undersupply and oversupply / has in place some processes, procedures and plans to address and accommodate for deviations from target levels and the issues of undersupply and oversupply, but has inadequate processes, procedures and plans in the following areas… ].Recommendations:
Commercial in Confidence 27
Commercial-In-Confidence
9. Risk Management and Corporate Governance
9.1 Applicant Risk Management
Applicant Risk Management Risk Management Framework
Risk Management Plan
Processes
Risk Matrices
Risk Register
Internal Controls
Risk Management Strategies
Commercial in Confidence 28
Commercial-In-Confidence
9.2 Arrangement Risk Management
Arrangement Risk Management Risk Management Framework
Risk Management Plan
Processes
Risk Matrices
Risk Register
Internal Controls
Risk Management Strategies
9.3 Summary of Key Risk Management Items
Risks associated with the Product Stewardship operations have been covered in [Applicant Attachment X] and a risk assessment matrix provided in [Applicant Attachment X, Page X]. In reviewing the applicant’s risk management framework with a particular focus on financial risk, we have identified the following items that were provided by [Applicant Name] that are of specific importance to the viability of the arrangement:
Risk RegisterItem No.
Event Consequence Likelihood Internal Controls /
Mitigation Strategy
Key Considerations and Identified Gaps
Commercial in Confidence 29
Commercial-In-Confidence
9.4 Corporate Governance
Corporate Governance Governance framework
Governance and risk committees
Dedicated person assigned to risk and compliance
Assessment of documentation provided
Key Considerations and Identified Gaps
9.5 Key Issues and Considerations
9.6 Assessment of Risk Management and Corporate Governance
Assessment of Risk Management and Governance
Risk Effect Description
[Assessed Risk Effect classification]
[Risk Effect Description that corresponds to the assessed Risk Effect classification as per the Risk Effect table]
Risk Likelihood Description
[Assessed Risk Likelihood [Risk Likelihood Description that corresponds to the assessed Risk
Commercial in Confidence 30
Commercial-In-Confidence
classification] Likelihood classification as per the Risk Likelihood table]
Risk Category Risk Effect Risk Likelihood Overall Risk Magnitude
Risk Management and Corporate Governance
[Assessed Risk Effect classification]
[Assessed Risk Likelihood classification]
[Derived Overall Risk Magnitude]*To be colour coded as per the defined traffic light reporting system
We have also undertaken a review of the applicant’s Risk Management and Corporate Governance frameworks and from our review of the documentation submitted the applicant appears to [have adequate risk management, contingency planning and corporate governance frameworks / does not appear to have an established risk management framework and has not demonstrated the adoption of any principles of good corporate governance / have basic frameworks in place with limited processes and protocols to address a limited number of identified risks].
Recommendations:
Commercial in Confidence 31
Commercial-In-Confidence
10. Information Sources and Supporting Documentation
10.1 Information Sources
Information SourcesInformation Sources
Summary of Identified Gaps The following items did not contain adequate detail:
[Comment on the potential impact of the gaps]
Discrepancies in the Information Provided
The following discrepancies were noted:
[Comment on the potential impact of the discrepancies]
Other Matters for Attention The following matters were identified for further review:
Commercial in Confidence 32
Commercial-In-Confidence
10.2 Request for Additional Information / Clarification
Following our review we would recommend the following information be obtained and/or clarified with the applicant where appropriate.
Risk Category Request for Additional Information / Clarification
Funding and Capital
Applicant Viability
Underlying Assumptions
Arrangement Viability
Adaptive Management Framework
Risk Management and Corporate Governance
Commercial in Confidence 33
Commercial-In-Confidence
11. Appendices
[Insert appendices and attachments]
Commercial in Confidence 34