Posted on : 5 Apr 2018 0 Comments
Session 1 – How to drive results through a compelling Business Case
Venke Rajendram, Senior Product Manager at AMP Capital
What is a business case?
A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document. Essentially a business case is expressing a reason why you need to undertake a project, what it will be and how you will undertake it.
There are many different facets to making a business case work, one worth calling out in the first instance is that you need to know what the governance process for your company is; the way that the process needs to occur.
You need to be across:
• What is the governance process?
o Ensure you are following the right process;
o Using the right documents and templates;
o Identify key decisions points.
• Who are the decision makers?
o Identify the decision makers;
o Ensure you understand the delegations of authority and decision-making rights within the business.
• Besides decisions makers, who are other key stakeholders?
o Identify and engage with decision makers and stakeholders i.e. who influences decisions?
o Understand and find out what they are looking for in the business case.
• Communicate widely on the business case (subject to sensitive information):
o The wider you spread your initial communication the more beneficial it could be down the track;
o Know your audience (ie who will be making the decision?) – It is critical to understand who you are directing the business case to – ensure you write it in ‘their language’. This can be difficult when there are a multitude of stakeholders in a larger organisation.
o Keep stakeholders/decision makers/influencers involved – it will make the approval process much simpler and you will find your stakeholders are already on-board and know what your plans are.
• Make sure what you need is in the paper – otherwise it won’t get approved!
Business Case Template – The paper that explains why you need it; what you plan to do and how!
1. Approval Sought
This will be what approval you are seeking from who exactly. It will allow people to be accountable and action their particular area, rather than get distracted in different areas.
2. Executive Summary
In certain scenarios senior people will essentially only read the “Approval Sought” and “Executive Summary” of your business case – for this one reason, it is the most important part of your document. You also don’t want it to be too long but you need people to know what you’re looking for – try to limit it to 2-3 pages.
o You’ve already said the ‘why’, now talk about the ‘how’, but be careful to avoid jargon as some of your key stakeholders may not be technical.
o Be very clear about WHAT you are asking for. Talk about the background and the rational for pursuing this initiative. Keep it to factual information. o Use a research appendix to elaborate so you don’t go into too much detail in the first instance. o Make sure to highlight the benefits, key risks and considerations on a high level. o Be sure to include time lines and highlight key dates.
This is where you get into the crux of it and engage every element of the particular product you’re looking to develop. This can be summed up in dot, and while every company will have different details required, this is a brief overview of what could be expected. The template is very specific for a launch of a fund and would need to be tailored if you are doing a transaction or non-fund related transaction. But this should be the details that are key for the transaction:
• Product name – which can interestingly be quite difficult depending on the current climate
• Product features and description
• Life of fund
• Portfolio Managers
• Investment Manager
• Investment Adviser
• Expected service providers
• Product Domicile
• Target markets
• Fee structure
• Proposed business partner or JV
• Proposed launch date
• Proposed seed assets
• Expected commitment
• Estimated establishment cost (this will be relevant and required for any business case)
• Expected ongoing profitability – a key point here is to be aware of what the revenue metric is for your company. Always have the P&L in mind – this will help keep stakeholders accountable. If they come with an enhancement to a product that will have a return of $10M, but the revenue metric for your particular area is $100M, you know right away that it just won’t work. (this will be relevant and required for any business case)
• Pricing frequency
• Distribution frequency
• Minimum commitment
• General partner
• Product type or structure
• Other key information
What will be required to essentially ensure the product works? You will need to look at:
• Resourcing – what resources are required, implication to business resources, impact to existing staff, are new staff required etc. This can be a big concern due to costs and a good way to mitigate surprises would be to leverage relationships internally and try get estimates beforehand.
• Systems – what systems are required; what will be the impact to these systems; is there testing and who will be responsible for testing if it is required.
• Finance – who will be responsible for the P&L and balance sheet reporting; who prepares it and who does it get reported to and at what frequency.
• Service providers – who will the key service providers be; what will their roles be i.e., custodians, administrators, brokers etc
• Ongoing compliance requirements – given the current compliance climate we have in all areas of financial services, you need to understand what the implications of the compliance regulations will be, including the reporting, how often, who does it need to be reported in to, who is responsible etc
• Expected Annual cost of administering the product – this is where you provide a detailed breakdown, assumptions etc
This is a crucial part of the process as people will want to see that you have done your due diligence and thought of every part of the puzzle. This may include:
• Key risks – worst case scenarios and how to mitigate them;
• Regulatory issues – again what are the scenarios to be considered, how do you mitigate them;
• Licensing – what are the licensing requirements for the products, are there any impacts of the financial conditions of the license due to the product or transaction.
• Related parties and other potential conflicts of interest – is there a conflict of interest to be considered and how would it be addressed i.e. given the royal commission on the Banks, you need to consider how any financial benefits being paid out or retained by the business would be viewed
• Accounting, Tax and Insurance – are there any particular issues to consider, identifiable tax issues; will there be any specific insurance required.
Your conclusion needs to be precise and include a brief summary as everything should have been detailed above. You can include more detailed information such as financials, project plans etc in the appendix.
o Communicate and engage with stakeholders before you commence building out a full business case;
o Know your audience i.e. how technical are they? Do they have deep knowledge?
o Always review, spell check, grammar check and do it again;
o Thesaurus is your best friend;
o Always try to keep it simple and to the point;
o Stick to facts;
o Case must align to strategic priorities of the organisation;
o Always consider risks that may arise and how to mitigate risk.
Key take aways:
Talk to your stakeholders (decision makers, stakeholders and influencers) to get them on board and get them to help you. You may not know everything that needs to be in the business case hence by talking to the stakeholders you will find out what is important to them and ensure it is included. You want to be able to find out quickly if there will be problems before you go through the whole exercise of a business case. Consider all possibilities eg projects that are in the pipeline and blackout periods. Gather feedback along the way.
Q. How do you decide to undertake a business case?
A. You can start with circulating a draft business case with the first few pages completed and then submit for feedback. This will help significantly in understanding what else the business needs. The business will come back with ‘pain points’.
Q. Are there any criteria to use to assess if there is a point to build a business case?
A. You need to make a judgement call and know the key metrics of the business eg the P&L numbers, Return on Equity, IRR. Also, talk to key business makers to understand what they want the direction of the business to be, both operationally as well as any challenges there might be. Will it be worth it to build a business case?
Q. How can you mitigate the revisions of a business case?
A. A good way to deal with it could be to prepare the first part of the template and then have a kick-off meeting and speak to those in particular who have issues. Also, ensure you know who the main decision makers are.