Overview of Advisory Services

WATC’s expertise, accumulated experience and knowledge is available to all Western Australian public sector agencies. Services offered include:

Debt structure analysis and advice

Fundamental to effective debt management is the selection of the most appropriate debt structure(s) to an individual organisation’s specific requirements. This involves the assessment and analysis of alternate debt portfolios and entails the evaluation of the cost and risk characteristics of alternate debt structures and the effective communication of the risk/cost trade-off to enable the selection of a debt portfolio that meets an acceptable risk tolerance and individual business requirements. WATC’s service offering includes:

  • development of stochastic interest rate models
  • development of appropriate risk and return metrics
  • specialist knowledge of interest rate risk management techniques
  • analysis of all forms of financial risk and modelling results
  • evaluation of client business requirements
  • assisting clients in understanding, quantifying and articulating their risk appetite
  • development of equilibrium (rather than arbitrage pricing) risk models
  • development of appropriate risk metrics for long-run analysis of debt portfolio structures
  • interest cost modelling and providing clients with estimates of projected interest costs and potential variation in estimates for budgetary planning
  • evaluation of alternate active debt management strategies.

Financial risk modelling and simulation

Risk management decision support is provided through the development of sophisticated quantitative models for the analysis and measurement of financial risks, including:

  • quantitative modelling of interest rate risk
  • quantitative modelling and simulation of foreign exchange risk
  • quantitative modelling and simulation of inflation
  • understanding of credit risk modelling
  • support in quantitative analysis of operational risk.

Asset and project investment evaluation

The effective financial evaluation of projects is critical in the identification and selection of projects that add value for clients and the State. WATC provides independent, expert advisory services on the evaluation of capital investment projects to ensure optimal and informed decision making. Tasks often include:

  • cash flow modelling and financial analysis
  • project investment evaluation
  • procurement options analysis
  • risk identification and minimisation advice
  • capital structure advice
  • assistance in the processes surrounding business case development, Expression of Interest (EOI) and Request for Procurement (RFP) process.

Project financing and alternate financing options

Asset and infrastructure procurement can often be a long and costly exercise. WATC provides assistance with the evaluation of traditional and alternative financing options to ensure clients are achieving value for money for their asset and infrastructure procurement. Services include:

  • project evaluation and financial modelling
  • advice on alternative financing options to match expected cash flows
  • project finance advice and structuring
  • public, private partnership (PPP) project advice
  • lease versus buy analysis
  • market sounding and stakeholder consultation to gauge level of investor interest
  • procurement tendering, EOI / RFP drafting and evaluation
  • commercial negotiations
  • financial close rate setting protocols and execution.

Business case development

WATC can assist with the development of comprehensive and detailed business cases to support the investment of resources in strategic client projects, including:

  • business case development and review
  • delivery options analysis
  • feasibility studies.

Cost of capital analysis

The selection of an appropriate discount rate is a fundamental component of evaluating investment decisions and the valuation of assets. It is also an integral component in the determination of the pricing framework for entities operating in a regulated environment. WATC provides corporate financial advice including:

  • weighted average cost of capital determinations
  • advice on rates of return
  • analysis and advice on aspects of the economic regulatory process
  • providing advice on the cost of debt and debt premiums
  • project finance evaluations.

Asset-liability modelling

In keeping with modern risk management practice that takes an integrated approach to enterprise risk management this involves jointly modelling both assets and liabilities. If risks are interrelated and impact on both the revenue and expenses, this modelling provides a different and more correct representation of the true risk faced by an organisation than if individual risks are analysed in isolation. WATC offers clients:

  • understanding of these techniques and their benefits
  • capability to integrate financial risk models (interest rate, inflation, foreign exchange, commodities) with client financial models
  • ability to evaluate and understand complex client financial models and determine the key drivers of risk in these models
  • capability to develop risk metrics appropriate to these analyses
  • experience in undertaking such analysis and awareness of the potential complexities and task requirements.

Investment policy development

WATC provides advice on investment of funds and has developed guidelines to aid agencies develop sound and robust investment policies. This includes:

  • advice to the Department of Treasury on prudential guidelines for State agencies
  • development of guidelines for the Department of Local Government for application to local governments
  • advice to individual agencies on investment policies
  • advice to agencies on financial products held in investment portfolios
  • development of asset allocations.

General financial analysis, modelling and advice

WATC provides capabilities to undertake analysis and provide solutions for a diverse range of financial questions. Projects undertaken include:

  • development of debt portfolio benchmarks
  • development of earning rate benchmark for investment portfolios
  • advice on holding structured financial products in investment portfolios
  • verification and validation of in-house financial models
  • evaluation of a managed investment proposal under CPI uncertainty
  • estimation of value of fishing licences
  • technical quantitative support in developing products and services.