CONTEXT

Our Client, a large Australian dairy processor, was considering a series of large investments to transform its manufacturing capacity and capabilities.  Plans were well progressed when CACE Partners was asked to assist management re-look at the business case, to ensure the investment made sense before presenting to the Board.

INSIGHTS / APPROACH

A small CACE Partners team worked with management to build an investment hypothesis, detailing the key elements of the proposed investment.  A set of key ‘what do we need to believe’ assumptions were then fleshed out, which identified key risks and requirements.  A practical approach to sensitivity analysis quickly identified the handful of key assumptions that were critical to the investment meeting its promised returns.

Whilst management were most worried about build cost overruns, returns were most sensitive to export sale prices and volumes.  These critical assumptions could then be tested in a rapid and low-cost way, to assess / improve confidence and de-risk the project.  Each of 7 investments were assessed in this way, with a number being shelved once it was clear the required volumes and prices were unlikely to be achieved, and with lower cost workarounds developed.

RESULTS