Financial planning and analysis all the pros and cons.
These principles recognize that financial planning and analysis of projects should be carried out in accordance with an integrated approach based, in particular, on a full assessment of the physical, economic and financial characteristics, as well as aspects related to the various participants and risks of each project, after the same frame or pattern.
Assessment of the physical characteristics of the project is aimed at determining or determining the most affordable technical solution to achieve the project goal. As for the economic analysis of fp & a, it focuses on the contribution of the project to the economy of the respective country and on the economic costs of producing goods or services.
In the context of financial principles and integrated assessment, economic analysis is based directly on the cash flows associated with the project. The economic approach to the benefits of the project is initially based on the products generated by the project and / or on the reduction of its cost in accordance with the methodology of financial evaluation of products or cost reduction.
Similarly, direct project costs form the basis for estimating the cost of an economic evaluation of a project. Based on this, any social costs are estimated and included in the economic analysis. Stakeholder analysis is aimed at identifying the main stakeholders involved in the project. Decision makers should know the current value of the net economic benefits received as a result of the project, as well as the benefits and / or losses incurred by each participant as a result of the project.
Financial planning analyst decisions regarding differences in the distribution of net economic benefits and net financial benefits should be explained. Finally, the goal of a sensitivity and risk analysis is to identify the risks associated with the project and to identify mitigation measures that need to be taken, if any. Project managers can to some extent control some risk factors, but other risk factors can only be managed at the level of the implementing agency and the government of the respective country. Some other risk factors are completely exogenous forces that no institution in the country can control.
Investing in projects is a set of processes aimed at preventing the economic benefits that can be obtained in the short term at the expense of financial resources, by investing them in land, buildings, equipment and other fixed assets for the production of articles, goods and services directly or by investing in securities or by providing loans directly to financial intermediaries. In this regard, the goal is to maximize economic benefits over the duration of the placement. Responsibility for the management and implementation of projects lies with the executing agencies and implementing agencies.
Potentially non-profitable projects are listed below for information. The recommendations of financial analysts can be useful for financial planning and analysis and reimbursement of costs and aspects related to improving the efficiency of projects in this category. It is important to note that the financial management expertise is required at the stage of supervision. Relevant projects cover the following sectors: agricultural expansion, basic education, public service reform, coastal resource management, ecotourism, healthcare, improved inter-regional systems, natural resource management, non-formal education, secondary education, rural infrastructure, poverty reduction, rural productivity, social sector development, urban development (e.g. drainage), urban environment.
A key element of the due diligence carried out by the Bank is the requirement that the Bank’s officials work in collaboration with their colleagues at the borrower’s institutions, including executive agencies, throughout the process of identification, preparation and evaluation of projects. After the start of the implementation of the non-profitable project, the Bank continues to request updated forecasts until the completion of the project in order to have an early warning system about possible problems. and take corrective action. In the case of a revenue-generating project, the financial analyst agrees with the executing agency for the period of submitting updated forecasts. The exact period will be determined at the discretion of the financial analyst and usually should not exceed ten years, but should remain within three to five years from the date of completion of the project.