financial Viability Assessment Guide: Voluntary Product ...€¦ · financial viability assessment, including the provision of financial statements and related documentation. The

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Financial Viability Assessment Guide: Voluntary Product Stewardship

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Contents

I. Introduction and Background ………………………………………………………………………………………… 3

II. Independent Assessor Eligibility Criteria ………………………………………………………………………….4

III. Key Objectives ………………………………………………………………………………………………………………….5

IV. Verification and Review Guidelines …………………………………………………………………………………7

V. Risk Allocation Guidelines ….……………………………………………………………………………………………9

VI. Assessment Guidelines ………………………………………………………………………………………………….13

VII. Glossary ……………………..……………………………………………………………………………………..……………61

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I. Introduction and Background

Financial Viability, Capacity and Sustainability – Assessment Guide

The Australian Government Department of Sustainability, Environment, Water, Population and

Communities (“the Department” or “SEWPaC”) develops and implements national policy, programs

and legislation to protect and conserve Australia's environment and heritage.

Product stewardship is an approach to managing the impacts of different products and materials. It

acknowledges that those involved in producing, selling, using and disposing of products have a

shared responsibility to ensure that those products or materials are managed in a way that reduces

their impact, throughout their lifecycle, on the environment and on human health and safety.

The Product Stewardship Act 2011 came into effect on 8 August 2011. This legislation provides the

framework to effectively manage the environmental, health and safety impacts of products, and in

particular those impacts associated with the disposal of products. The framework includes voluntary,

co-regulatory and mandatory product stewardship. The passage of the legislation delivers on a key

commitment by the Australian Government under the National Waste Policy which was agreed in

November 2009 and endorsed by the Council of Australian Governments in August 2010.

Voluntary accreditation of schemes encourages product stewardship without the need for specific

regulation and provides the community with confidence that accredited schemes have the capability

to achieve the desired outcomes. Product stewardship organisations that are accredited under the

legislation must meet specific requirements to ensure they carry out their activities in a transparent

and accountable manner.

An applicant for accreditation of a voluntary product stewardship arrangement will be required to

engage an independent third party to assess and prepare a report on the financial aspects of the

arrangement (including its administrator), and to provide the report to the Department with its

application. The independent third party (“independent assessor” or “assessor”) will review the

applicant’s submission in accordance with the Assessment Guide. The review process will be

conducted under conditions of strict confidence.

This document serves as a guide for the assessment and reporting of the financial viability,

sustainability and capacity of the proposed arrangement as detailed within the applicant’s

submission.

The applicant will be required to provide appropriate authorisations to facilitate the commercial and

financial viability assessment, including the provision of financial statements and related

documentation. The Department may subsequently seek clarification from, and enter into

discussions with, the assessors as to the findings of their assessment.

The Department may subsequently conduct further and more comprehensive assessments at a later

stage. Therefore, it should be noted that the applicant’s ability to meet the requirements of this

assessment should not necessarily be construed that it meets the final financial viability and capacity

requirements for the purposes of this or any other engagement.

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II. Independent Assessor Eligibility Criteria

An independent third party (“assessor”) must meet the following minimum criteria in order to be

eligible for the purposes of conducting the assessment:

Qualifications and Experience: Assessors must be accounting qualified individuals with a

current professional membership to either the Institute of Chartered Accountants in

Australia (ICAA) or CPA Australia. Each individual involved in the assessment must have a

minimum of five (5) years’ experience in providing financial viability assessment services.

Professional Indemnity and Insurance: The assessor is to hold certificates of currency for

both Professional Indemnity Insurance (with a policy limit of liability not less than $20m) and

Business Insurance (with a policy limit of liability not less than $20m). By accepting the

engagement, the assessor agrees to hold this level of cover for a minimum period of three-

years following the date of the assessment report.

Professional Fees: The assessor is to hold a signed engagement letter pertaining to this

assessment, with all assessment services being provided on a fixed-fee arrangement. The

professional fees charged for this service are to be disclosed within the engagement letter,

and must be paid in advance (and in full) prior to the assessor commencing the engagement.

Conflicts of Interest: The assessor and assessment firm will not be eligible to conduct this

assessment where other commercial, financial, accounting or advisory services are provided

to the applicant and/or a related party of the applicant. By accepting the engagement, the

assessor confirms there is no current perceived, potential or actual conflicts-of-interest, and

agrees to immediately notify SEWPaC (in writing) of any such conflicts-of-interest that may

occur throughout the engagement, and for a period of six-months following the provision of

the assessment report.

Confidentiality: The assessor will only be eligible where appropriate operational procedures

are maintained to ensure the security of confidential information. By accepting the

engagement the assessor agrees to enter into appropriate confidentiality undertakings (as

required), and will restrict access to such information to authorised individuals only. The

assessor also confirms such information will be maintained in a secure document room

and/or locked cabinet as appropriate.

Assessors Declaration: The assessor will not be eligible where there is any known scope

limitation or information restriction at the commencement of the engagement. By accepting

the engagement, the assessor confirms they have reviewed and are prepared to sign the

assessors declaration contained within the “Investigation into the Application for

Accreditation as a Voluntary Product Stewardship Arrangement”, and agrees to disclose to

the Department whether the applicant provided their full participation and whether there

was any restriction or delay in being provided with the information requested throughout

the course of the review.

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III. Key Objectives

The purpose of this process is to provide an assessment as to whether the application for accreditation of a voluntary arrangement sufficiently demonstrates that the proposed Voluntary Product Stewardship Arrangement (“the arrangement”) will have adequate financial arrangements and funding to achieve the outcomes and requirements of the Product Stewardship Act 2011 (“the Act”), the Product Stewardship (Voluntary Arrangements) Instrument 2012 (“the Instrument”) and the Product Stewardship Regulation 2012 (“the Regulation”).

The Instrument requires that the Minister (or delegate) consider a number of criteria when deciding whether to approve or refuse an arrangement. These include:

Whether or not the arrangement is likely to achieve its stated outcomes; and

Whether or not the arrangement deals adequately with certain matters, which include:

o Governance and organisational matters, including procedures for decision-making and dispute resolution;

o Financial arrangements and funding to achieve the outcomes of the arrangement;

o Assessing the adequacy of the environmental, health and safety policies and practices in relation to the activities undertaken under the arrangement;

o The use of the product stewardship logo in relation to the arrangement;

o Monitoring and evaluating the performance of the arrangement in achieving the outcomes of the arrangement; and

o Procedures relating to membership of the arrangement;

o Communicating information to the public about how its services can be accessed; and

o Managing risk in relation to the operation of the arrangement.

The outcomes for the arrangement will need to be elaborated in its application. Further information may be found on the department’s website at: http://www.environment.gov.au/settlements/waste/product-stewardship/voluntary-arrangements/index.html.

To assist in this process, the applicant is required to engage an Independent Assessor to review the applicant’s proposed arrangement, and to compile a report which is to include:

(a) A statement of the independent assessor’s opinion as to whether, based on the application

and supporting documentation:

i. the arrangement will have access to sufficient funding to ensure financial viability over time;

ii. the key assumptions underlying the arrangement’s financial projections are reasonable;

iii. the arrangement has in place adequate risk management, contingency planning and adaptive management frameworks;

(b) Key findings in relation to assumptions, uncertainties and risks;

(c) Recommendations in relation to the ongoing financial management of the arrangement; and

http://www.environment.gov.au/settlements/waste/product-stewardship/voluntary-arrangements/index.html

http://www.environment.gov.au/settlements/waste/product-stewardship/voluntary-arrangements/index.html

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(d) Detailed analysis supporting the opinion, findings and recommendations referred to above.

The assessor will be required to form an opinion as to whether or not the information provided in

the application sufficiently demonstrates that the arrangement will have adequate financial

arrangements and funding to achieve the outcomes and requirements in the Act, the Instrument and

the Regulation.

In providing this advice, the assessor will consider the information that has been submitted by the

applicant to the assessor directly, as well as other relevant information including other information

provided through the application process. The advice will be provided in a report that will include

consideration as to whether claims made by the applicant about its financial arrangements are

unreasonable or not supported by sufficient evidence to ascertain that they are reasonable; as well

as identifying any areas of significant, relevant uncertainty or risk; and providing sound rationale for

all conclusions drawn.

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IV. Verification and Review Guidelines

The Verification and Review Guidelines should be used as important reference material in

undertaking the assessment and appropriately sourcing supporting evidence and references in order

to form an opinion as to the assessed level of risk in each respective risk category (refer V. Risk

Allocation Guidelines) of the Assessment Report.

In determining whether the applicant meets all the key objectives outlined in Section “III. Key

Objectives”, the assessor is required to undertake a process of review and verification in order to

substantiate all existing and/or proposed arrangements, assumptions and agreements.

Materiality

Throughout this review, the principle of materiality should be adopted by the assessor. Materiality is

defined by Australian Accounting Standards (AABS1031) as:

“information which if omitted, misstated or not disclosed has the potential to adversely affect… decisions …made by users of [information] or the discharge of accountability by the management or governing body of the entity”

Verification and Review Procedures

In undertaking the process of review and verification, the assessor is required to obtain sufficient

appropriate supporting evidence and references to be able to draw reasonable conclusions on which

to base the assessor's opinion as to the assessed level of risk for each respective risk category.

Procedures which may be employed in the assessor’s process of review and verification may include:

Procedure Inspection Inspection may consist of examining records or documents, as well

as physical examination of assets or operations.

Observation Observation consists of looking at a process or procedure being performed by others.

Enquiry Enquiry consists of seeking information of knowledgeable persons, both financial and non-financial, throughout the entity or outside the entity. This includes external confirmation which would serve as corroborative evidence.

Confirmation Confirmation, which is a specific type of enquiry, is the process of obtaining a representation of information or of an existing condition directly from a third party.

Recalculation and Re-performance Recalculation consists of checking the mathematical accuracy of documents or records. While Re-performance involves the independent execution of procedures or controls.

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Analytical procedures Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and non-financial data. Analytical procedures also encompass the investigation of identified fluctuations and relationships that are inconsistent with other relevant information or deviate significantly from predicted amounts.

Professional Judgement

The following guidelines are intended to serve as a comprehensive guide to undertaking the

assessment, however it should be noted that the nature of each individual review will vary and as

such, the assessor is required to apply professional judgement in assessing each individual

circumstance. Although the guide is intended to provide a comprehensive source of reference, given

that the nature of each assessment is unique and will vary by case, the considerations within these

guidelines should in no way be taken as exhaustive.

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V. Risk Allocation Guidelines

The Risk Allocation Guidelines should be used as important reference material in appropriately

classifying the assessed level of risk for each respective risk category, as well as in formulating the

assessors overall opinion as provided in the Executive Summary of the Assessment Report.

In determining whether the applicant meets the key objectives outlined in Section “III. Key

Objectives”, the assessor is required to review and assess the level of risk across a range of risk

categories outlined in the table below.

Risk Category

Funding and Capital

Applicant Viability

Underlying Assumptions

Arrangement Viability

Adaptability Management Framework

Risk Management and Governance

The assessor will consider a range of factors within each category to determine whether the

applicant’s proposed arrangement has demonstrated adequate financial arrangements and funding

in order to achieve the outcomes and requirements of the Act, the Regulation and the Instrument.

Risk Classification

The assessor is required to form an opinion as to the Risk Effect, Risk Likelihood and Overall Risk

Magnitude of each individual risk category, and these grades should be assigned in accordance with

the prescribed risk classification matrices outlined below.

Risk Likelihood and Risk Effect

Following a detailed review of each individual risk category, the assessor is required to form an

opinion as to the Risk Likelihood (probability) and the Risk Effect (consequence) of each individual

risk category in accordance with the following matrices:

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Risk Effect

Risk Effect Description

Severe No capability, capacity or experience and/or lack of understanding - would result in the applicant not meeting the outcomes and requirements in the Act, the Regulation and the Instrument.

High Very limited capability, capacity or experience and/or lack of understanding – substantial impact on the arrangement’s ability to meet the outcomes and requirements in the Act, the Regulation and the Instrument.

Medium Some capability, capacity or experience and/or lack of understanding – material impact on the arrangement’s ability to meet the outcomes and requirements in the Act, the Regulation and the Instrument.

Low Satisfactory capability, capacity or experience and/or understanding – minimal impact on the arrangement’s ability to meet the outcomes and requirements in the Act, the Regulation and the Instrument.

Insignificant Good capability, capacity or experience and/or understanding – negligible impact on the arrangement’s ability to meet the outcomes and requirements in the Act, the Regulation and the Instrument.

Risk Likelihood

Risk Likelihood Description

High Is expected to occur in the first 12 months of the arrangement

Medium Likely to occur at some later date

Low May occur at some later time

Rare May occur but only in exceptional circumstances

Insignificant Not likely to occur

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Overall Risk Magnitude

In accordance with the classifications assigned for the Risk Effect and Risk Likelihood, the

applicant’s Overall Risk Magnitude is to be derived from the following matrix:

Risk Magnitude

Risk Effect Risk Likelihood

High Medium Low Rare Insignificant

Severe Very High Very High High High Medium

High Very High Very High High Medium Low

Medium High High Medium Low Very Low

Low Low Low Low Very Low Insignificant

Insignificant Very Low Very Low Very Low Insignificant Insignificant

A traffic light reporting system should be employed to visually highlight the assessed Overall

Risk Magnitude for each individual risk category in accordance with the following colour

scheme:

Overall Risk Magnitude Colour Scheme

Very High Red

High Red

Medium Orange

Low Green

Very Low Green

Insignificant Green

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Presentation in the Assessment Report

The assessed risk derived from the above risk classification and matrices is to be presented at the

end of each respective section in a standard table format outlined below:

Assessment of [Risk Category]


[Assessed Risk Effect

classification]

[Risk Effect Description that corresponds to the assessed Risk

Effect classification as per the Risk Effect table]


[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

[Risk Category]

[Assessed Risk

Effect

classification]

[Assessed Risk

Likelihood

classification]

[Derived Overall Risk

Magnitude]

*To be colour coded as

per the defined traffic

light reporting system

The assessed risk from each respective risk category is then summarised in the Executive Summary

of the assessment report by the following table:


Funding and Capital [Assessed Risk

Effect

classification]

[Assessed Risk

Likelihood

classification]

*To be colour coded as

per the defined traffic

light reporting system

Applicant Viability



Adaptive Management Framework

Risk Management and Governance

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VI. Assessment Guidelines

Contents

1. Executive Summary ................................................................................................................... 14

2. Scope of Report ......................................................................................................................... 18

3. Background ............................................................................................................................... 20

4. Funding and Capital .................................................................................................................. 22

5. Applicant Viability ..................................................................................................................... 25

6. Underlying Assumptions ........................................................................................................... 34

7. Arrangement Viability ............................................................................................................... 39

8. Adaptive management framework ........................................................................................... 47

9. Risk Management and Corporate Governance ......................................................................... 50

10. Information Sources and Supporting Documentation .............................................................. 58

11. Appendices ................................................................................................................................ 60

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1. Executive Summary

The assessor is to provide a few short paragraphs summarising the general overview and background

of the applicant and the arrangement that they are proposing. Reference should be made to the

following key information:

Background of the applicant including establishment date or years in business

Principal trading activities

Entity type and corporate structure

Arrangement the applicant is proposing / brief summary of the proposed business model

Any clear advantages or economies of scale the applicant may possess

Key assumptions that underpin projections

1.1 Key Findings and Considerations The assessor is to summarise the key findings of their

assessment highlighting the following factors which are to be determined from their detailed

review:

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 assessor is also required to summarise the total cost assumption of the arrangement and

highlight any critical success factors which underpin the arrangement’s ability to realise the

assumptions:

The proposed arrangement includes an expected cost budget of [$xxx/metric unit] and the

realisation of this budget is dependent upon the following:

• Achieving [xxx metric units] per annum

•

•

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1.2 Professional Opinion The assessor is to specify their opinion as to whether or not the

applicant’s application 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.

In 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 Act, the Regulation and the Instrument.

The assessor’s overall opinion should be consistent as well as reflective of the assessor’s

individual assessments of the various risk categories and other relevant matters, and should be

summarised by completing the following table:


Funding and Capital [Colour Code]

Applicant Viability [Colour Code]

Underlying Assumptions [Colour Code]

Arrangement Viability [Colour Code]

Adaptive Management Framework [Colour Code]

Risk Management and Governance [Colour Code]

The assessor is also required to separately state their professional opinion derived from the

individual assessments of funding and capital, applicant viability, underlying assumptions,

arrangement viability, adaptive management framework, and risk management and corporate

governance.

Funding and Capital

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: ….. ]

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Applicant Viability

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.


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].


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 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].


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… ].

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Risk Management and Corporate Governance

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].

1.3 Recommendations The assessor is required to provide recommendations in relation to the

viability of the arrangement.

Recommendations may include (however are not limited to):

Request clarification of … [anomalies, discrepancies]

Request further details relating to …

Request letters of support from … [e.g. partners, directors etc.]

Counterparty risk assessments on …

Performance reference checks on ...

Ongoing monitoring of the financial viability of the arrangement

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2. Scope of Report

The scope of the report establishes the context of the assessment and the basis in which the

assessment is conducted and also requires the assessors’ compliance with the eligibility criteria. It

also provides the assessor with the opportunity to detail the applicant’s level of participation and

any actual, potential or perceived conflicts of interest which may have arisen at any stage

throughout the assessment.

Applicant Participation

The assessor is required to disclose whether the applicant undertook full participation for the

purposes of the assessment and to highlight whether there were any limitations imposed by the

applicant.

Sample:

Scope

Subject Participation Full Participation, all documentation, interviews and site

visitations as requested, also completed the ‘Request for

Information’ form without limitation

Conflict of Interest

The assessor and members of the assessor’s team must declare to SEWPaC any actual, potential or

perceived conflict of interest prior to undertaking independent reviews of the application and any

conflicts which may have occurred throughout the course of the engagement. This will include any

material personal or financial interests in any applicant. For further details relating to conflicts of

interest, please refer to II. Independent Assessor Eligibility Criteria. Conflicts of interest which are

evident are to be summarised in the table below:

Sample:

Scope

Conflict of Interest

The applicant is a former client

A staff member taking part in the assessment of the application has a close personal relationship with a person that works for the organisation that is submitting the application (the applicant)

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Financial Assessor’s Declaration

The assessor is to include a signed ‘Financial Assessor’s Declaration’ in accordance with

III. Independent Assessors Eligibility Criteria which is to be signed by an appropriate representative

within the assessor’s organisation.

Applicant’s Undertaking

The assessor is to include a signed ‘Applicant’s Undertaking’ which is to be signed by an appropriate

representative within the applicant’s organisation.

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3. Background

3.1 Overview The assessor is to complete the overview table pertaining to the applicant including

ABN, entity type, head office address, contact details, brief history and the profiles of the

directors.

Subject Name [Applicant Name]

ABN [XX XXX XXX XXX]

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]



Note. Where the applicant comprises a group of entities, the above table should be repeated

for each respective member of the consortium, partnership or alliance.

3.2 Proposed Arrangement The assessor is to provide an overview of the proposed arrangement,

identifying key objectives, stakeholders and metrics relating to the applicant’s proposal.

Supporting facts and evidence of prior experience may be highlighted in support of the

applicant’s capability.

3.3 Stakeholder Chart The assessor is to insert a relationship chart of all key stakeholders and

counterparties to the proposed arrangement.

3.4 Key Stakeholders and Counterparties The assessor is to complete the ‘Key Stakeholders and

Counterparties’ table which includes consideration of all arrangements in place with all key

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stakeholders and counterparties to the applicant’s overall arrangement. This will include a

qualitative and quantitative review of the proposed arrangements that are to be put in place,

key dependencies on any stakeholders and/or counterparties, as well as an assessment as to

likelihood and reasonableness of the rationale and references behind all proposed

arrangements.

Stakeholder Arrangement Status and references

The assessor is to

input the name of

the relevant

stakeholder /

counterparty.

The assessor is to include a

description of the proposed

arrangement and relationship which

is to take place.

The assessor is to include a

description of the current status of

the arrangement and relationship,

whether any heads of agreement,

memorandum of understanding,

etc. have been signed.

Supporting References:

The assessor is to state the

supporting evidence which had

been provided and sighted.

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4. Funding and Capital

In assessing the adequacy of the applicant’s proposed means of funding, this may include

detailed analysis of the following:

Review funding arrangements and funding plan

Review of funding facilities that will be made available

Review of ongoing funding to be derived from proposed operating model

4.1 Summary of Funding The assessor is to complete the ‘Summary of Funding’ table outlining the

applicant’s proposed key sources of funding the proposed arrangement. These sources may

include (but are not limited to) initial (seed) capital, external funding arrangement, related

party funding, committed equity investors, etc. This should be extracted over a forward looking

period of at least 3 years.

4.2 Funding Analysis The assessor is to complete the ‘Funding Analysis’ table commenting on all

sources of funding for the proposed arrangement. These sources may include initial funding,

external funding facilities, committed ongoing funding and conditional funding.

Funding Analysis

Initial Funding The assessor is provide commentary on the initial seed capital the

applicant is proposing to secure and/or has secured in capitalising

the business. Reference may be made to initial start-up costs and

expenditure commitments and the sufficiency of this level of initial

capitalisation.

External Funding Facilities The assessor is provide commentary on the applicant’s secured /

committed external funding facilities. This includes a review of

relevant limits, tenure and maturity dates, loan covenants,

whether amounts are deemed adequate and the review of any

additional conditions associated with these facilities. Reference

should be made to any supporting evidence which has been

provided in substantiating these facilities (e.g. bank letters).

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Committed Ongoing Funding The assessor is to provide commentary on the applicant’s proposed

ongoing funding sources. This may include (but is not limited to)

related parties including director support, committed equity capital

and/or external finance facilities. The assessor is to consider the

reasonableness of the sources of ongoing funding, any attached

conditions to this committed funding and the likelihood of the

applicant continuing to access these proposed funds in the future.

Reference should be made to any supporting evidence which has

been provided in substantiating these sources of funding (e.g.

letters of support, memorandums of understanding, etc.).

Conditional Funding The assessor is provide commentary on any means of funding

which is yet to have been committed and is conditional. This may

include (but is not limited to) related parties including director

support, committed equity capital and/or proposed strategies of

raising additional funding and/or external finance in the future.

The assessor is to consider the reasonableness and likelihood of

the applicant securing the proposed and conditional sources of

ongoing funding. Reference should be made to any supporting

evidence which has been provided in substantiating these sources

of funding (e.g. letters of support, memorandums of

understanding, etc.).

4.3 Key Issues and Considerations The assessor is to highlight in point form all key issues and

considerations identified that are deemed material together with the likely consequence of any

events arising as a result.

4.4 Assessment of Funding and Capital The assessor is to form an overall opinion on the adequacy

of the applicant’s proposed means of funding and its overall assessed level of risk. The Risk

Effect, Risk Likelihood and Overall Risk Magnitude should be assigned in accordance with the

classification matrices outlined within the Risk Allocation Guidelines (refer V. Risk Allocation

Guidelines).

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Sample:

Assessment of Funding and Capital


High Very limited capability, capacity or experience and/or lack of

understanding – substantial impact on the arrangement’s ability

to meet the outcomes and requirements in the Act, the





Funding and Capital

High High Very High

The assessor is also required to separately state their professional opinion from their overall

assessment of funding and capital. The following paragraph should be used as a guide in stating the

assessor’s opinion which should be consistent as well as reflective of the assessor’s assessed Overall

Risk Magnitude. For the assessor’s ease of reference, the paragraph below has been colour coded to

correspond with the traffic light reporting system defined in section ‘V. Risk Allocation Guidelines’.

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 Regulations 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:

The assessor is required to provide any key recommendations regarding funding and capital.

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5. Applicant Viability

The assessor is to undertake a review of the applicant’s financial viability which includes a

qualitative and quantitative review, as well as an assessment of the entity’s overall credit quality

and ability to operate as a going concern.

5.1 Applicant Viability The assessor is to complete the ‘Applicant Viability’ table which includes a

qualitative review of the applicant’s history, management capabilities, financial and

management policies, operational dependencies, quality and reliability of financial statements

as well as a quantitative review of the applicant’s key financial metrics, trading performance,

capitalisation, liquidity and future outlook.

The assessor’s commentary should be presented in the table in point form. In assessing the

adequacy of the applicant’s viability the assessor may include consideration of the following:

Applicant Viability

Applicant History The assessor is to summarise the applicant’s history and previous experience. Consideration should be given to the following:

[Applicant] was incorporated in XXXX

Principal trading activities include …

Whether the applicant forms part of a well established group, including…

Whether the applicant has previous experience in operating comparable arrangements or regimes, including…

Management Capabilities The assessor is to comment on management’s capabilities and previous experience. Consideration should be given to the following:

Whether management’s board of directors and management team have appropriate qualifications and prior experience in the operation of a similar or comparable arrangement.

Whether the applicant appears to have demonstrated a rigorous management framework supported by their governance framework, project plans / project implementation strategy and monitoring and control activities (project monitoring and evaluation)

Managerial competency covering each of the primary management disciplines including…

Page 26 of 64

Financial & Management

Policies The assessor is to comment the applicant’s financial and management policies. Consideration should be given to the following:

Financial risk management practices

Corporate governance policy, compliance policies, committees, responsibilities, and related governance procedures

Board membership, voting quorum, meeting minutes, meeting attendees and frequency

Operational Dependencies The assessor is to provide commentary on any operational dependencies the applicant may have. Consideration should be given to the following:

Whether the applicant is reliant upon any key stakeholders and other counterparties including directors for either funding or support

Whether the applicant is dependent upon a specific skill set of stakeholder, asset or license / rights of use, etc.

Whether the applicant is reliant upon any contextual factors which may include social, economic, legal/regulatory, technological, or environmental factors.

Financial Statements The assessor is to summarise the historical financial information submitted and highlight the quality of the accounts:

[Applicant] provided [#] years [management/statutory/audited] financial statements (including notes to the accounts)

[Applicant] provided [#] years prospective financial information including…

Audit letter prepared by [Auditor name] and [did not list or contain any qualifications / was qualified on the basis of ...]

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Trading Performance The assessor is to provide commentary and key metrics regarding the applicant’s historical trading performance:

For the year ended XXXXXX, the applicant reported:

a. Sales revenue and gross profit of $[x] which represented [growth / a contraction] of [x]%

b. Other revenue was reported at $[x] ([x]% government funded)

c. Net profit before tax of $[x]

d. Non-recurring gains / losses and/or losses from asset divesture of $[x]

e. Comprehensive income of $[x]

f. Net operating cash-flow of $[x]

Note. For every category, please reference key trends across relevant metrics outlined in section 5.2 Key Metrics of the report.

The applicant has shown an [improvement / deterioration / stable] in margins

Applicant recorded impairment of $[x] in 20XX

Trading performance was [positively / negative] impacted in the 20XX year as a result of…

Capitalisation

The assessor is to provide commentary and key metrics regarding the applicant’s capitalisation:

For the year ended XXXXXX, the applicant reported:

a. Total assets of $[x]

b. Total intangibles represent [x]% of total assets and included…

c. Shareholder’s Equity of $[x]

d. Net tangible worth of $[x]

e. Net tangible worth to sales of [x]%

f. Reinvestment ratio of [x]%

g. Gearing of [x]%

h. Debt to capital of [x]%


The applicant appears to be [adequately / inadequately] capitalised

Consideration should be given to whether the applicant’s level of capitalisation is heavily dependent upon any underlying factors [e.g. the recoverability of related party loans, the realisable value of [x] assets, etc.]

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Capitalisation

(continued)

Commentary on initial seed capital where appropriate

Commentary on off balance sheet items such as operating leases and capital commitments

Liquidity The assessor is to provide commentary and key metrics regarding the applicant’s liquidity:

For the year ended XXXX, the applicant reported:

a. Cash and Equivalents of $[x] (cash ratio of [x]% of CL)

b. Working capital of $x (being [x]% of total revenues)

c. Encumbered cash represented [x]% of cash reserves and [x]% of working capital

d. Current ratio of [x] times (CA/CL)

e. Quick ratio [x] times ((CA – Inventory)) / CL)

f. Cash-flow coverage of [x]% (of CL)


It would appear the applicant [has / has not] demonstrated adequate liquidity and capability to service its short-term commitments

Consideration should be given to whether the applicant’s working capital, liquidity and ability to meet short-term commitments is heavily dependent upon any underlying factors [e.g. the recoverability of current related party loans receivable, the turnover of inventory, etc.]

Consideration should be given to whether the applicant’s cash flow and cash position is inflated by increased revenue in advance, increased creditor days and decreased working capital days.

Financial Structure

The assessor is to provide commentary and key metrics regarding the applicant’s financial structure, funding and debt serviceability:

For the year ended XXXX, the applicant reported:

a. Net tangible worth position of $[x]

b. Interest-bearing debt of $[x]

c. Interest free loans of $[x]

d. Net cash-flow from financing activity of $[x]

e. Interest cover of [x] times (EBIT / IE)

f. Financial leverage of [x] times (Total Debt* / EBITDA)

*Total Debt should be included as a gross amount and

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Financial Structure

(continued)

is not net of cash on hand


Consideration of contingent liabilities and the ability to service these liabilities should they materialise

It [would / does not] appear that the applicant has demonstrated adequate funding and debt serviceability

The applicant [would / does not] appear to have adequate head room within lending covenants to raise additional external finance if required

Future Outlook The assessor is to provide commentary and any corresponding metrics on the applicant’s future outlook:

The applicant is forecasting sales revenue of [x], net profit of [x] for the year ending 20XX.

Comment on whether there is a projected deterioration / Improvement in [financial metrics]

Applicant’s financial statements and whether they appear to demonstrate a financially stable and viable operation

Consideration as to any challenges or headwinds which are currently or potentially encountered by the sector / industry

Assessed Credit Quality and

Credit rating

From the detailed analysis of the above sections, the assessor is to form an opinion and to make an overall assessment as to the applicant’s credit quality and financial viability and capacity to honor contractual commitments.

In order to provide a uniform and consistent assessment, the assessor should assign the applicant with a credit rating which is reflective of the assessor’s opinion of the applicant’s overall assessed credit quality.

Example:

The applicant’s financial viability was reviewed and based on

[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.

Note. Where the applicant comprises a group of entities, the above table should be repeated

for each respective member of the consortium, partnership or alliance.

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Risk Dependencies

In assessing the above areas in determining the applicant’s overall viability, there can be many

different types of risk dependencies and/or exposures that can impact the overall financial risk

assessment of an applicant. In assessing the applicant’s viability, the assessor should consider

the various risks and is required to highlight these risks where a material dependency or

exposure is evident. A general outline of some critical risks and primary measures to identify

these risks are detailed in the table below.

Key Risks Area for investigation Key Metric References

Counterparty risk (being the risk of default by another entity within the group)

Credit quality of the consolidated group position and/or critical counterparties

Credit quality

Dependency risk (where the entity’s reported position is based on intergroup trading)

Reliance and implications of intergroup trading activity

Intergroup transaction / sales

Liquidity risk (where the entity’s working capital is supported by short-term loans)

Reliance and implications of solvency support

Current related party receivables / working capital

Non-current related party payables / working capital

Refinance risk (where the entity is reliant on continued funding and support for operations)

Reliance and implications of continued group funding

Total related party receivables / net worth

Funding risk (where the entity requires additional capital and or funding for growth)

Reliance on additional finance to fund future growth

Growth rate

Sustainable Growth

Asset risk (where the entity or guarantor has insufficient collateral or security available)

Capital adequacy and available collateral

(Net worth – total related party receivables) / sales

Net worth / maximum expected loss

Note. There are a multitude of other risk factors that should be considered within the scope of this

review which may include interest rate risk, foreign currency risk, market risk and operating risk.

5.2 Key Financial Metrics The assessor is to provide a summary financial metrics schedule

summarising a range of financial indicators which have been reviewed and utilised in assessing

the applicant’s overall financial viability.

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Sample:

Financial Metrics

Jun 2011 '000

Jun 2012 '000

Sep 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

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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




5.4 Applicant Viability Assessment The assessor is to form an overall opinion on the viability of

applicant and its overall assessed level of risk. The Risk Effect, Risk Likelihood and Overall Risk

Magnitude should be assigned in accordance with the classification matrices outlined within the

Risk Allocation Guidelines (refer V. Risk Allocation Guidelines).

Sample:

Assessment of Applicant Viability


Severe No capability, capacity or experience and/or lack of understanding

- would result in the applicant not meeting the outcomes and

requirements in the Act, the Regulation and the Instrument.


Medium Likely to occur at some later date


Applicant Viability

Severe Medium Very High

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assessment of the viability of the applicant. The following paragraph should be used as a guide in

stating the assessor’s opinion which should be consistent as well as reflective of the assessor’s

assessed Overall Risk Magnitude. For the assessor’s ease of reference, the paragraph below has

been colour coded to correspond with the traffic light reporting system defined in section ‘V. Risk

Allocation Guidelines’.

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:

The assessor is required to provide any key recommendations regarding the applicant’s viability.

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6. Underlying Assumptions

The assessor is to undertake a review of the applicant’s underlying assumptions which underpin

financial projections and estimates and which will include the consideration of revenues, total

cost and other expenditure commitments of the arrangement. This review is to include:

Identification of key assumptions including revenue and cost assumptions

Analysis of the derivation of these assumptions and approach

Seek supporting evidence and/or references to underlying assumptions regarding key revenue and costing elements

Examples of Verification Procedures which may be adopted:

Vouch underlying assumptions regarding key revenue and costing elements to supporting

evidence and/or references

Tests of reasonableness to ensure the adequacy of projections

Recalculation and re-performance of revenue and cost derivations

Consideration as to the completeness of all cost items included in financial projections

6.1 Overview of Key Assumptions The assessor is to complete the ‘Overview of Key Assumptions’

table which includes consideration of revenues, total cost and other expenditure commitments

of the arrangement.

Revenue The assessor is to complete the Revenue Assumptions section of the ‘Overview of Key

Assumptions’ table which includes:

Identification of key revenue assumptions

Analysis of the derivation of these assumptions and how revenue is derived

Analysis of the underlying rationale and approach utilised by the applicant

All assumptions should be verified by supporting evidence that is to be provided in

substantiating these underlying assumptions

Key Assumption Description / Approach Supporting Evidence and/or

References Provided

Revenue Assumptions

(i) [Revenue source]

The assessor is to input the source of

revenue.

[$xx/ unit metric]

Calculated by:

The assessor is to show the calculation

by which revenue is derived.

Description of approach and

rationale including whether

arrangement is to be on a

fixed fee, cost-plus etc. basis.

E.g.

Signed contracts

Memorandums of

Understanding

Invoices or other

evidence of arm’s length

transaction

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Costs A summary of all cost items is to be prepared by the assessor, together with the

corresponding stated cost as included in the applicant’s projections and estimates. The assessor

should apply professional judgement in identifying the key cost drivers behind the stated cost

assumptions and in making an assessment as to the reasonableness of the stated costs in the

applicant’s projections and estimates. The assessor is to complete the Cost Assumptions section

of the ‘Overview of Key Assumptions’ table which includes:

Identification all cost assumptions including a summary of all cost items is to be prepared by the assessor, together with the corresponding stated cost as included in the applicant’s projections and estimates.

Analysis of the derivation of these assumptions including underlying rationale and approach utilised by the applicant. The assessor should apply professional judgement in identifying the key cost drivers behind the stated cost assumptions and in making an assessment to the reasonableness of the stated costs in the applicant’s projections and estimates.

All assumptions should be verified by supporting evidence and/or references that are to be

provided in substantiating these underlying assumptions.

Key Assumption Description / Approach Supporting Evidence

and/or References

Provided

Cost Assumptions

(i) [Cost Item]

The assessor is to input the

identified cost item.

[$xx/ unit metric]

The assessor is to input

assumed dollar value of the

cost per metric unit

Description of approach and rationale

including the identification of key cost

drivers.

E.g.

Fee quotations

Memorandums of

Understanding

Invoices or other

evidence of arm’s

length transaction

(ii) Overheads / operating expenses

The assessor is to provide a detailed

listing of all overheads / operating

expenses.

E.g.

Fee quotations

Memorandums of

Understanding

Invoices or other

evidence of arm’s

length transaction

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Key Assumption Description / Approach Supporting Evidence

and/or References

Provided

(ii) Overheads / operating expenses (continued)

Detailed listing example*:

000’s

Advisor / Consultant Fees $

Audit sites/Recyclers $

Branding/Marketing $

Board expenses $

Data/CRM $

Funding for programs $

Finance Leases $

Insurance $

Premises & utilities $

Print/Stationery/office supplies $

Staff, salary, recruitment $

Travel /entertainment $

Technology $

Telecommunications $

Miscellaneous $

Total $

*Note. These are indicative overhead categories only, and it is the assessors’ responsibility to ensure

the completeness of these respective categories based on the nature of the assessed business

Commentary on Underlying Assumptions

The assessor should provide any additional and/or supplementary commentary on the

applicant’s underlying assumptions, including consideration as to the feasibility of the

assumptions, whether there are any key dependencies in achieving the assumptions and any

other material factors associated with their realisation.

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6.2 Additional Costs and Contingencies The assessor is to complete the ‘Additional Costs and

Contingencies’ table which includes consideration of additional / unaccounted costs and

contingencies.

Item Description / Approach

(i) Additional / unaccounted costs

Identification of any additional cost that were not incorporated

into the applicant’s key assumptions.

The assessor is to include a brief description of the rationale

behind the additional / unaccounted costs and the reason(s) as to

why these costs may have been excluded.

(ii) Contingencies Identification of any contingencies that may potentially arise which

may result in costs that were not incorporated into the applicant’s

key assumptions.

The assessor is to include a brief description of the rationale

behind the potential contingency and an assessment to the

likelihood of this event materialising.

Commentary on Additional Costs

The assessor should consider the completeness of cost items stated in the applicant’s

projections and whether any additional cost items may exist. Any additional costs and/or

contingencies that are not incorporated into the applicant’s projections and estimates, however

which could potentially arise should be reviewed and analysed in this section. The assessor

should consider the likelihood and consequence of such costs arising and the potential impact

of such costs on the viability of the arrangement.




Consideration should be given to the following:

Key considerations and any limitations which are deemed material are required to be

highlighted together with the likely consequence of any events arising as a result.

The assessor is to highlight and summarise any identified gaps and discrepancies in the

assumptions and prospective information submitted.

Reasonableness of the assumptions adopted by the applicant in preparing financial

projections and estimates

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6.4 Assessment of Underlying Assumptions The assessor is to form an overall opinion on the

Underlying Assumptions and their overall assessed level of risk. The Risk Effect, Risk Likelihood

and Overall Risk Magnitude should be assigned in accordance with the classification matrices

outlined within the Risk Allocation Guidelines (refer V. Risk Allocation Guidelines).

Sample:

Assessment of Underlying Assumptions


Medium Some capability, capacity or experience and/or lack of

understanding – material impact on the arrangement’s ability to

meet the outcomes and requirements in the Act, the Regulation

and the Instrument.





Medium Low Medium


assessment of the underlying assumptions. The following paragraph should be used as a guide in





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:

The assessor is required to provide any key recommendations regarding the applicant’s underlying

assumptions.

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7. Arrangement Viability

The assessor is to undertake a review of the overall viability of the proposed arrangement. This

includes a qualitative review of the arrangement’s operations, as well as a quantitative review of the

total cost and other expenditure commitments of the arrangement, and whether the proposed

means of funding is considered adequate in meeting these costs.

This will include an assessment as to the applicant’s capacity to meet obligations, as well as an

assessment as to the appropriateness and reasonableness of the underlying drivers which underpin

the key assumptions which were adopted in deriving financial projections and estimates. This review

will include:

Review of projected membership

Scenario analysis and review of estimated activity levels

Break-even analysis on cost, volume and price

Examples of Verification Procedures which may be adopted:

Vouch to supporting evidence and/or references to underlying assumptions regarding key

costing elements

Tests of reasonableness to ensure the adequacy of projections

Recalculation and re-performance of revenue and cost derivations

7.1 Commercial Review The assessor is to complete the ‘Operational Review’ table which

includes a qualitative review of the arrangement’s capability and competency, key

contractual arrangements and other documentation as well as performance requirements,

milestones, service level agreements, termination clauses and liquidated damages. The

assessor’s commentary should be presented in the table in point form.

Commercial Review

Capability and Competency The assessor is to review and provide commentary as to whether the applicant has adequately demonstrated that they are informed of the industry and market dynamics and whether the applicant has proven experience in managing such arrangements.

Key Contractual Arrangements

and Documentation The assessor is to review and provide commentary on any key contractual arrangements and/or other documentation which may be in place with any key stakeholders or counterparties to the arrangement.

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Performance Requirements,

Milestones and Service Level

Agreements

The assessor is to review and highlight any performance requirements, milestones and Service Level Agreements which may be in place with any key stakeholders.

Termination Clauses and

Liquidated Damages The assessor is to review and highlight any termination clauses which may in place and any associated liquidated damages which may arise as a result.

Legal Factors and

Contingencies The assessor is to review and provide commentary as whether there are any legal considerations and contingencies which may have a material impact on the arrangement.

7.2 Projected Membership The assessor is to complete the ‘Projected Membership’ table providing

specific company details as to the potential members which are expected be signed up to the

arrangement should the applicant be successful in obtaining accreditation. Entity names,

registered business numbers and volume estimates should summarised.

Member Name ABN Product Type Volume Estimates

Sign-up Status

Name of member

ABN number of the member

Product Type in which the proposed member is to sign for

Volume estimates in relevant metrics units incorporated in the applicant’s financial projections

Current status of membership sign-up programs, the current status of any negotiations, whether any heads of agreement have been signed Supporting Evidence and/or references: E.g. Signed contracts, heads of agreement, etc.

Commentary on Projected Membership

Commentary should be provided as to the current status of membership sign-up programs, the

current status of any negotiations, whether any heads of agreement have been signed and the

likelihood of the applicant achieving its projected membership base.

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7.3 Cash Flow Analysis The assessor is to review cash flow projections to determine whether the

arrangement is expected to have a positive operating cash flow position. Cash flow projections

should be summarised in the table below and should be for at least 5 years forward looking.

Cash Flow Analysis

2013 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

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Commentary on Cash Flow Analysis

Commentary should be provided as to the overall reasonableness of cash flow projections and

whether cash flow projections indicate a financially viable arrangement.

Consideration may be given to the following where appropriate:

Where a negative cash flow forecast position exists, how is the shortfall to be funded and when is the arrangement expected to turn cash-positive?

Is the assessor’s analysis of funding and capital in section 3.1 considered adequate to account for any cash flow shortfall?

Are there any cash outflows which appear to have been clearly omitted?

Are there any contingencies which may deplete projected cash positions and if so, are there adequate funding arrangements in place to support the arrangement in the event that these contingencies materialise?

7.4 Scenario Analysis The assessor is to review the estimated activity levels that underpin financial

projections including an overview of the various scenarios presented by the applicant. The

scenarios presented should be summarised in the ‘Scenario Analysis’ table provided:

Scenario Assumptions /

Penetration

Type Volume

Scenario 1 [Key assumption(s)] e.g.

Basis for reporting

[xxx metric unit]

Scenario 2 [Key assumption(s)]

e.g.

Worst case

[xxx metric unit]

Scenario 3 [Key assumption(s)]

e.g.

Realistic case

[xxx metric unit]

Scenario 4 [Key assumption(s)] e.g.

High end case

[xxx metric unit]

The assessor is also required to assess the impact of different revenue and cost sensitivities in

order to evaluate the potential overall financial impact. The assessor should summarise the

financial impact across the different scenarios modelled. The financial impact should be

presented and summarised in a ‘Financial Impact of Modelled Scenarios’ table:

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Sample:

Financial Impact of Modelled Scenarios

Type

Assumption

2013 (f) 2013 (f) 2013 (f) 2013 (f)

Scenario 1

X% Segment A

X% Segment B

Scenario 2

X% Segment A

X% Segment B

Scenario 3

X% Segment A

X% Segment B

Scenario 4

X% Segment A

X% Segment B

Revenue Assumptions

Revenue from

recycling

Cost plus mark-up $xx/metric unit $xx/metric unit $xx/metric unit $xx/metric unit

Subscription Fees Fixed subscription $Xm p.a. $Xm p.a. $Xm p.a. $Xm p.a.

Total Revenue $Xm $Xm $Xm $Xm

Cost Assumptions

Channel Cost

(Collection)

$X/metric unit $Xm $Xm $Xm $Xm

Logistics -

(Transportation)

$X/ metric unit $Xm $Xm $Xm $Xm

Recycling Costs

$X/metric unit

(Segment A)

$X/metric unit

(Segment B)

$Xm $Xm $Xm $Xm

Program

Management Fee

$X per annum

$Xm $Xm $Xm $Xm

Overheads $Xm for year one

and escalated at

5% thereafter

$Xm $Xm $Xm $Xm

Total Cost $Xm $Xm $Xm $Xm

Cost/metric unit $X $X $X $X

Operating Profit $Xm -$Xm -$Xm $Xm

(f): Forecast

Note. The above table is to be repeated for each forward looking year of the applicant’s

financial projections.

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Commentary on Scenario Analysis

The assessor should consider the completeness of the various scenarios considered by the

applicant and whether there are any distinct scenarios and/or contingencies that have not been

considered by the applicant. The assessor should consider the overall impact and consequence

of such scenarios on the individual costs identified in section 6.1 Overview of Key Assumptions

and any potential impact of such costs on the applicant’s overall viability and capacity.


Whether the applicant has provided sufficient coverage of various scenarios which could

potentially arise and an assessment as to whether the various scenarios modelled are

realistic.

7.5 Break-Even Analysis The assessor is to identify, determine and form an opinion as to what the

break-even level of cost, volume, price and penetration is expected to be required to enable the

arrangement to be financial viable. Essentially, this is the assessor’s determination of the level

of volume/penetration which will underpin revenue and cost drivers that will enable total

revenue to be equivalent to total expenditure. The assessor should apply professional

judgement in assessing the feasibility and overall reasonableness of the arrangement achieving

the break-even level based on the applicant’s projections and estimates. The determined break-

even level should be summarised in the table below:

Determined Break-Even Level

Break-Even Cost Break-Even Volume Break-Even Price

Commentary on Break-Even Analysis

The assessor is to provide commentary to support the assessed break-even level. Consideration

may be given to the following where appropriate:

Break-even level of volume and penetration and an assessment as to whether this level is

achievable and how this compares to the projected base or realistic case scenario

Is the assessor’s analysis of funding and capital in section 3.1 considered adequate to account for any shortfall?

Are there any costs which appear to have clearly been omitted?

Are there any contingencies which may have a material impact on the arrangement’s viability, and if so are the funding arrangements outlined in section 3.1 of this report considered adequate to support the arrangement in the event that these contingencies materialise?

Page 45 of 64





Key considerations and any recommendations required to be highlighted together with the

likely consequence of any events which may arise as a result.

The assessor is to highlight and summarise any identified gaps and discrepancies in the

prospective information submitted.

7.7 Arrangement Viability Assessment The assessor is to form an overall opinion on the viability of

the arrangement and its overall assessed level of risk. The Risk Effect, Risk Likelihood and

Overall Risk Magnitude should be assigned in accordance with the classification matrices


Sample:

Assessment of Arrangement Viability


Low Satisfactory capability, capacity or experience and/or

understanding – minimal impact on the arrangement’s ability to


and the Instrument.





Low Low Low


assessment of the viability of the arrangement. The following paragraph should be used as a guide in





Page 46 of 64

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 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:

The assessor is required to provide any key recommendations regarding the viability of the

arrangement.

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8. Adaptive management framework

The assessor is to review the information which was provided in the applicant’s application to

determine how the arrangement will address and accommodate for deviations from target levels

including situations where memberships or targets change.

8.1 Adaptive Management Framework The assessor is to complete the ‘Adaptive Management

Framework’ table, conducting their review on the applicant’s Demand Management, Exit

Protocols and Contingency Planning as per the below table:


Demand Management The assessor is provide commentary and identify the key mechanisms in which the applicant is equipped to address and accommodate for deviations from target levels including situations where memberships or targets change. The assessor is to apply professional judgement in considering the reasonableness of the proposed mechanisms and whether on an aggregated basis the mechanisms address the potential for fluctuations in demand management.

Contingency Planning The assessor is to provide commentary and identify the key strategies which the applicant has in place to address and accommodate for situations which may arise other than the scenarios which have otherwise already been considered within the applicant’s application. The assessor is to apply professional judgement in considering the reasonableness of the proposed mechanisms and whether the proposed strategies address and accommodate for situations which may arise other than the scenarios which have otherwise been considered within the applicant’s application.

Exit Protocols The assessor is to provide commentary and identify the strategies which the applicant has in place to address and accommodate for the situation whereby the applicant may be required to exit the arrangement. This situation may include (but is not limited to) the scenario where the applicant elects to sell the business or is acquired by another entity; where the applicant is to encounter adverse trading conditions which may result in the arrangement being wound up; or where the applicant is simply chooses to end the arrangement. The assessor is to apply professional judgement in considering the reasonableness and completeness of the proposed strategies and whether they address the various situations which would require the applicant to exit the arrangement.

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considerations identified that are deemed material together with the likely consequence of

any events arising as a result.

8.3 Assessment of Adaptive Management Framework The assessor is to form an overall

opinion on the applicant’s Adaptive Management Framework and its overall assessed level

of risk. The Risk Effect, Risk Likelihood and Risk Magnitude should be assigned in accordance

with the classification matrices outlined within the Risk Allocation Guidelines (refer V. Risk

Allocation Guidelines).

Sample:

Assessment of Adaptive Management Framework


Medium Some capability, capacity or experience and/or lack of

understanding – material impact on the arrangement’s ability to


and the Instrument.




Adaptive Management

Framework

Medium Low Medium


assessment of the adaptive management framework. The following paragraph should be used as a

guide in stating the assessor’s opinion which should be consistent as well as reflective of the

assessor’s assessed Overall Risk Magnitude. For the assessor’s ease of reference, the paragraph

below has been colour coded to correspond with the traffic light reporting system defined in section

‘V. Risk Allocation Guidelines’.

Page 49 of 64

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:

The assessor is required to provide any key recommendations regarding the applicant’s adaptive

management framework.

Page 50 of 64

9. Risk Management and Corporate Governance

The assessor is to review the information which was provided in the applicant’s application to form

an opinion as to whether the arrangement has in place adequate risk management, contingency

planning and corporate governance frameworks.

9.1 Applicant Risk Management The assessor is to complete the ‘Risk Management’ table,

conducting their review on the applicant’s risk management plan and associated

information.

In assessing the adequacy of the applicant’s risk management framework, the assessor may

include consideration of the following:

Applicant Risk Management

Risk Management Framework The risk management framework [does not / appears] to

be easily understood

The risk management plan [identifies / does not identify]

key stakeholders

The plan [does not / appears] to consider various

contextual factors which may include social, economic,

legal, regulatory, technological, or environmental factors.

Risk Management Plan The applicant appears to have provided a [high level /

comprehensive] risk management plan

The risk management plan [does not / identifies]

accountabilities and appears workable

More specifically, responsibilities for updating, monitoring

and review [are / not] clearly defined

The risk management plan [does / not] appear to consider

combinations of multiple risks and appropriate actions

The risk management plan [does not / appears] to be

developed in accordance with AS/NZS ISO31000:2009

Processes The risk management process [does / does not] address

communication and consultation

The risk management process [does / does not] address

monitoring and review activities

The risk management plan [does not / outlines] a process

that includes periodic revision

Page 51 of 64

Risk Matrices The plan [does / does not] detail the assessment criteria to

determine the classification of likelihood and consequence

The plan [does / does not] detail the risk rating (severity)

matrix classifications and issue escalation protocols

Risk Register The risk register identifies risks across [a few / many

different] categories including business continuity,

information, physical, personal, etc.

The risk register [does / does not] detail risk management

strategies to control, treat & mitigate identified risks

Internal Controls The risk management plan [specifies / does not specify]

how the risk management skills of managers and staff will

be developed and maintained.

There [does not appear / appears] to be internal controls

in place which record details of risks, controls and

priorities and show any changes in them;


in place which record risk treatments and associated

resource requirements;


in place which record details of incidents and loss events

and the lessons learned;


in place which track accountability for risks, controls and

treatments;


in place which track progress and record the completion of

risk treatment actions;


in place which allow progress against the risk management

plan to be measured; and


in place which trigger monitoring and assurance activity.

Risk Management Strategies There [does not appear / appears] to be clearly defined

goals and objectives

There [does not appear / appears] to be clearly defined

strategies in place in achieving the defined goals and

objectives

The proposed strategies [do not appear / appear] to be

appropriate in achieving the defined goals and objectives

Page 52 of 64

9.2 Arrangement Risk Management The assessor is to complete the ‘Risk Management’ table,

conducting their review on the applicant’s risk management framework and associated

information which is specific to the proposed arrangement.

In assessing the adequacy of the applicant’s risk management framework which has been

developed specifically for the proposed arrangement, the assessor may include

consideration of the following:

Arrangement Risk Management

Risk Management Framework The risk management framework [does not / appears] to

be easily understood

The risk management plan [identifies / does not identify]

key stakeholders

The plan [does not / appears] to consider various

contextual factors which may include social, economic,

legal, regulatory, technological, or environmental factors.

Risk Management Plan The arrangement appears to have provided a [high level /

comprehensive] risk management plan

The risk management plan [does not / identifies]

accountabilities and appears workable

More specifically, responsibilities for updating, monitoring

and review [are / not] clearly defined

The risk management plan [does / not] appear to consider

combinations of multiple risks and appropriate actions

The risk management plan [does not / appears] to be

developed in accordance with AS/NZS ISO31000:2009

Processes The risk management process [does / does not] address

communication and consultation

The risk management process [does / does not] address

monitoring and review activities

The risk management plan [does not / outlines] a process

that includes periodic revision

Risk Matrices The plan [does / does not] detail the assessment criteria to

determine the classification of likelihood and consequence

The plan [does / does not] detail the risk rating (severity)

matrix classifications and issue escalation protocols

Page 53 of 64

Risk Register The risk register identifies risks across [a few / many

different] categories including business continuity,

information, physical, personal, etc.

The risk register [does / does not] detail risk management

strategies to control, treat & mitigate identified risks

Internal Controls The risk management plan [specifies / does not specify]

how the risk management skills of managers and staff will

be developed and maintained.


in place which record details of risks, controls and

priorities and show any changes in them;


in place which record risk treatments and associated

resource requirements;


in place which record details of incidents and loss events

and the lessons learned;


in place which track accountability for risks, controls and

treatments;


in place which track progress and record the completion of

risk treatment actions;


in place which allow progress against the risk management

plan to be measured; and


in place which trigger monitoring and assurance activity.

Risk Management Strategies There [does not appear / appears] to be clearly defined

goals and objectives

There [does not appear / appears] to be clearly defined

strategies in place in achieving the defined goals and

objectives

The proposed strategies [do not appear / appear] to be

appropriate in achieving the defined goals and objectives

Page 54 of 64

9.3 Summary of Key Risk Management Items The assessor is to complete the ‘Summary of Key

Risk Management Items’ table, conducting their review on the arrangement’s risk

management plan / risk register with a particular focus on financial risk and the overall

financial viability of the arrangement. Key risk management items listed in the applicant’s

submission deemed the most relevant to the overall financial viability of the arrangement

should be summarised in the table below:

Risk

Register

Item No.

Event Consequence Likelihood Internal Controls / Mitigation

Strategy

Key Considerations and Identified Gaps

The assessor is to highlight and summarise the identified gaps and any other key considerations

in the risk management information submitted.

9.4 Corporate Governance The assessor is to complete the ‘Corporate Governance’ table,

conducting their review on the applicant’s Corporate Governance Framework with a

particular focus on financial risk and the overall financial viability of the arrangement.

In assessing the adequacy of the applicant’s corporate governance framework, the assessor

may include consideration of the principles of good Corporate Governance as defined by the

Australian Securities Exchange (ASX).

The assessor needs to take into the account the size and structure of the applicant for the

purposes of ascertaining whether appropriate governance measures are in place, however

the following provides an illustrative list that would be appropriate for a large organisation.

Corporate Governance

Governance Framework

The objectives and strategy of the risk and governance

frameworks are endorsed by the board and senior

executives

Clear delineation of the respective roles in compliance of

all layers of the organisation

Page 55 of 64

Governance and Risk

Committees

There [appears / does not appear] to be an established

board with the functions of the board and senior

executives clearly defined.

The composition and experience of the board / senior executives appear to cover each of the primary management disciplines including…

The board and senior executives [have / do not have] appropriate qualifications and prior experience in the operation of a similar or comparable arrangement.

A majority of the board [comprise / do not comprise] of independent directors

The applicant [has / does not have] an established audit committee with at least 3 members and is comprised of only non-executive directors, a majority of independent directors and is chaired by an independent chair.

The applicant [has / does not have] an established remuneration committee.

The remuneration committee should be structured so that it consists of a majority of independent directors, is chaired by an independent chair and has at least three members.

Dedicated Personnel to Risk

and Compliance

Appropriate resources are allocated to develop,

implement, maintain and improve the organisation’s /

arrangement’s risk and compliance programs

The applicant [has / has not] appointed dedicated

personnel to oversee risk and compliance. This includes

the following personnel….

[List names, titles and experience of relevant personnel]

Responsibility for compliant outcomes [is / is not] clearly articulated and assigned.

Competence and training needs are identified and addressed to enable employees to fulfil their compliance obligations

Controls are in place to manage the identified compliance obligations and achieve desired behaviours

Policies and Procedures

The process of evaluating the performance of senior

executives [is / is not] well defined

The applicant [has / does not have] an established code of

conduct [which is appears detailed and appropriate for the

proposed arrangement]

The applicant [has / has not] established policies for the

oversight and management of material business risks and

has disclosed a summary of those policies.

Page 56 of 64

Policies and Procedures

(continued)

The board should require management to design and

implement the risk management and internal control

system to manage the company's material business risks

and report to it on whether those risks are being managed

effectively. The board should disclose that management

has reported to it as to the effectiveness of the company's

management of its material business risks.

The board should disclose whether it has received

assurance from the chief executive officer (or equivalent)

and the chief financial officer (or equivalent) that the

declaration provided in accordance with section 295A of

the Corporations Act is founded on a sound system of risk

management and internal control and that the system is

operating effectively in all material respects in relation to

financial reporting risks.

The applicant [has / does not have] an established

compliance policy which is aligned to the organisation’s

strategy and business objectives.

Performance of the compliance program is monitored,

measured and reported

The organisation is able to demonstrate its compliance

program through both documentation and practice.

The compliance program is regularly reviewed and

continually improved.

For further guidance and additional detailed references and background information on

Corporate Governance, please refer to ‘Corporate Governance Principles and

Recommendations with 2010 Amendments’, 2nd Edition, ASX Corporate Governance Council

which has an in depth overview of the principles and recommendations stated above.

Key Considerations and Identified Gaps

The assessor is to highlight and summarise in point form the identified gaps and any other key

considerations in the corporate governance information submitted.


considerations identified that are deemed material together with the likely consequence of

any events arising as a result.

Page 57 of 64

9.6 Assessment on Risk Management and Corporate Governance The assessor is to form an

overall opinion as to the overall adequacy of the applicant’s Risk Management and

Governance frameworks and its overall assessed level of risk. The Risk Effect, Risk Likelihood

and Risk Magnitude should be assigned in accordance with the classification matrices


Sample:

Assessment of Risk Management and Governance


High Very limited capability, capacity or experience and/or lack of

understanding – substantial impact on the arrangement’s ability

to meet the outcomes and requirements in the Act, the





Risk Management and Corporate

Governance

High High Very High


assessment of the applicant’s risk management and corporate governance frameworks. The

following paragraph should be used as a guide in stating the assessor’s opinion which should be

consistent as well as reflective of the assessor’s assessed Overall Risk Magnitude. For the assessor’s

ease of reference, the paragraph below has been colour coded to correspond with the traffic light

reporting system defined in section ‘V. Risk Allocation Guidelines’.

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:

The assessor is required to provide any key recommendations regarding the applicant’s risk

management and corporate governance frameworks.

Page 58 of 64

10. Information Sources and Supporting Documentation

10.1. Information Sources The assessor is required to complete the Information sources table

below:

Information Sources

Information Sources The assessor is required to list all information sources in which the assessment was based on.

Personnel Interviewed The assessor is required to list the name, title and contact details of all personnel interviewed.

Physical Sites Inspected The assessor is required to detail the location and nature of all physical sites inspected.

Summary of Identified Gaps The assessor is required to highlight which items did not contain

adequate detail.

The assessor is to comment on the potential impact of the gaps

and whether they are significant enough to impact the overall

opinion.

Discrepancies in the

Information Provided

The assessor is required to highlight discrepancies which were

identified in the applicant’s submission.

The assessor is to comment on the potential impact of the

discrepancy and whether they are significant enough to impact the

overall opinion.

Page 59 of 64

Other Matters for Attention The assessor is required to highlight matters for further review.

The assessor is to include any other matters in this section that may not have been covered elsewhere in the report.

10.2 Request for Additional Information / Clarification The assessor is required to complete the

Request for Additional Information / Clarification table below:

Assessment Category Request for Additional Information / Clarification

Funding and Capital

Applicant Viability




Risk Management and Corporate Governance

Page 60 of 64

11. Appendices

The assessor is to attach any schedules or supporting references deemed relevant in supplementing

the assessment report. An example of such appendices may include:

Heads of agreement

Business plans

Financial projections

Funding and bank letters

Page 61 of 64

VII. Glossary

Act refers to the Product Stewardship 2011.

Arrangement refers to the Voluntary Product Stewardship Arrangement.

Application refers to all forms, information, documents and associated material lodged by the applicant regarding the application for accreditation as a Voluntary Product Stewardship Arrangement.

Adaptive Management Framework refers to policies, plans, protocols and procedures as well as any associated strategies that the arrangement has in place to address and accommodate for deviations from target levels and situations where membership, targets and activity levels change.

Base case refers to the scenario in which the applicant is projecting to be the most likely

scenario of occurrence.

Credit quality a measurement of an entity's ability and willingness to meet commitments

and obligations as and when they fall due. The lower the credit quality of an entity, the

greater the risk to all relevant stakeholders and the greater the risk of default on the

principal. A credit rating is a measure of credit quality.

Funding arrangements includes any proposed or committee d agreements in place in order for the applicant to derive funding.

Funding facilities external banking and other finance facilities in which the applicant is

expected to have access to.

Funding plan a schedule outlining all proposed and committed sources of funding in which the applicant is expected to have access to at the date of the application.

Instrument refers to the Product Stewardship (Voluntary Arrangements) Instrument 2012.

Key assumptions refer to underlying assumptions in which underpin the applicant’s

estimates and projections.

Materiality is defined by Australian Accounting Standards (AABS1031) as “information which

if omitted, misstated or not disclosed has the potential to adversely affect… decisions

…made by users of [information] or the discharge of accountability by the management or

governing body of the entity”.

Page 62 of 64

Operating model is the applicant’s underlying business model and the means in which it is

proposing to generate positive cash flow.

Overall Risk Magnitude is a product of the assessed Risk Effect and Risk Likelihood and is to

be derived from the Risk Magnitude matrix detailed in section V. Risk Allocation Guidelines.

Risk Effect is the consequence of occurrence of a risk event. The Risk Effect is to be classified

in accordance with the defined Risk Effect matrix detailed in section V. Risk Allocation

Guidelines.

Risk Likelihood is the probability of occurrence of a risk event. The Risk Likelihood is to be

classified in accordance with the defined Risk Likelihood matrix detailed in section V. Risk

Allocation Guidelines.

Regulation refers to the Product Stewardship Regulation 2012.

Submission refers to the application and all associated information, documents and material

lodged by the applicant regarding the application for accreditation as a Voluntary Product

Stewardship Arrangement.

Page 63 of 64

Financial Metrics

The following table is a guide to the ratios that may be included in this report. Note: Financial ratios are indicators of an entity's performance and financial position and will provide useful information, especially when comparing entities in the same industry. It must however be pointed out that ratios can be influenced by, but not limited to, point-in-time adjustments, decisions taken by management, use of different accounting policies and whether the entity is part of a larger group.

Indicator Calculation

Profitability

Gross Profit Margin Gross Profit / Sales shown as a percentage

Net Profit Margin Net Profit before Tax / Sales shown as a percentage

Profitability Annualised Profit after Tax and Dividends / Total Assets shown as a percentage

Reinvestment Retained Earnings / Total Assets shown as a percentage

Return on Assets Annualised Profit before Interest and Tax / Total Assets shown as a percentage

Return on Equity Annualised Profit after Tax / Shareholders Equity shown as a percentage

Liquidity

Working Capital Current Assets - Current Liabilities

Working Capital to Sales Working Capital / Annualised Sales shown as a percentage

Cash Flow Coverage Annualised Operating Cash Flow / Current Liabilities shown as a percentage

Cash Ratio Cash/Current Liabilities shown as a percentage

Current Ratio Current Assets / Current Liabilities

Quick Ratio (Current Assets - Inventories) / Current Liabilities

Capital Adequacy Adjusted Net Tangible Assets/Annualised Sales shown as a percentage

Gearing

Net Tangible Worth Total Net Assets – Intangibles

Net Asset Backing Net Tangible Worth / Annualised Sales shown as a percentage

Gearing Total Liabilities / Total Assets

Debt to Equity Total Interest Bearing Debt/Shareholders Equity

Interest Coverage (Profit before Tax and Interest Expense) / Interest Expense

Repayment Capability Annualised Profit before Tax / Total Liabilities shown as a percentage

Financial Leverage Interest-Bearing Debt / Annualised EBITDA

Short Ratio Current Debt/Total Debt shown as a percentage

Operating

Operating Leverage Percentage change before Interest and Tax/Percentage change in Sales

Creditor Exposure Trade Creditors / Total Assets shown as a percentage

Creditor Days (Trade Creditors / Annualised Cost of Goods Sold) x 365 days

Page 64 of 64

Inventory Days (Inventories / Annualised Cost of Goods Sold) x 365 Days

Debtor Days (Trade Debtors / Annualised Sales) x 365 days

Cash Conversion Cycle Debtor Days + Inventory Days-Creditor Days

Other Indicators

Sales (Annualised) Annualised Sales Revenue

Activity Annualised Sales / Total Assets

Dividend Payout Dividend / Profit after Tax shown as a percentage

Related Party Loans Receivable Current plus non current loans owing by related parties

Related Party Loans Payable Current plus non current loans owing to related parties

Related Party Loans Dependency Related Party Loans Payable/Working Capital shown as a percentage

Quick Asset Composition Quick Assets / Total Assets as a percentage

Current Asset Composition Current Assets / Total Assets as a percentage

Current Liability Composition Current Liabilities / Total Liabilities as a percentage

Z-Score Risk Measure Professor Altman's formula for assessing firm bankruptcy

Documents

financial Viability Assessment Guide: Voluntary Product ...€¦ · financial viability assessment, including the provision of financial statements and related documentation. The