The new report up close (part 2) — the full report
This is the second part of our guide to our new report (Click here for the first part, where we go through the executive summary in detail). On top of many of user’s wishlists after we released the first version of AidHedge was more data about transactions, especially outcome data for reporting. This is the result.
Attention, this is an old article where certain parts may not be completely up to date. Aidhedge is a young company where things quickly change. We have chosen to retain the article as a “lessons learned”.
The full report
Going on from the executive summary, the full report provides more detailed data. It starts with an overview of the entire project budget. Then it goes on to the nitty gritty: an analysis of each transaction. For all completed transactions we provide an outcome analysis: The result of the transaction compared to budget, based on the development of currency rates. And for each future transaction, the current risk. Everything is of course dynamically calculated, so all the data is up to date when you look at it!
Going on from the executive summary, the full report provides more detailed data. It starts with an overview of the entire project budget. Then it goes on to the nitty gritty: an analysis of each transaction. For all completed transactions we provide an outcome analysis: The result of the transaction compared to budget, based on the development of currency rates. And for each future transaction, the current risk.
Everything is of course dynamically calculated, so all the data is up to date when you look at it!
1. Project visualisation
The full report kicks off with a visualisation of how the budget is developing. The graph shows you the entire project period, and dotted red and blue lines that represent the budgeted development of donor funding and project costs. This is based on budgeted currency transactions.
In our demo project we have budgeted with about USD 4 000 000 in donor funds coming in during the project period. As you see the dotted blue line reaches its peak in early 2018, showing you that this is the time of the last donor disbursement. Project costs that are exchanged out from USD amount to a budgeted USD 2 700 000. These run longer, as we plan for project implementation about six months after the last donor funds come in.
As you can see there is a discrepancy between donor funds and project costs, in USD. But this only represents how funds flow in this project. All funds from donors are exchanged into our budget currency, USD. But not all funds are then exchanged into our two local currencies. This is because we have some costs at HQ, and also costs for international experts. As these are costs in USD, they are not exchanged.
The graph shows you where in time we are, and the rate development up to that point. These are represented in thicker red and blue lines. As you can see both are below the dotted budget lines, especially the red costs line. This shows you why we have had a decreased value of incoming donor funds, but also decrease in project costs.
On the right hand side of the now line you see a gray area that represents the calculated remaining risk due to currency fluctuations. As you can see, the drop in rates on the costs side leaves almost the entire risk area below the dotted budget line. That indicates that its is very likely that costs will end up lower than budgeted, due to the changes in currency rates.
Using the red buttons on the side of the graph allows you to isolate donor funds or project costs for a closer look.
2. Data about risk and current result
After the visual representation of the project development from a budget/currency transactions point of view we give you some figures to go with it. First up is an estimate of the maximum risk towards incoming donor funding. Its about 12 %, or half a million dollars. Next comes the same figure for project costs. As we have seen in the graph above, the rates involved on the costs side have moved in a way that makes the remaining risk small, only about 2 %. And remember, this are the calculated maximum risks. So we can be quite confident with the costs not running away due to rate fluctuations at this point.
The last of the three figures here is the current result. This is the aggregated result of all the completed transactions in the project so far, as compared to budget. The sum, 93 976 USD, means that rate fluctuations so far has been positive for the project in total.
3. Best and worst case scenarios
As we have different sets of currencies involved in donor funds and project costs, they might not covariate over time. That is, we can’t be sure that changes in funding are followed by the same changes in costs. So when looking at risk, you need to take this into account. We try and illustrate the total interval by showing best and worst case scenarios.
The best case scenario is when currency rates change so that your incoming donor funds increase in value at the same time as your project costs decrease. In our demo project, the current best case scenario would mean an increase in funds and a decrease of costs leaving us with about USD 865 000 more than budgeted. The worst case scenario, on the other hand would see us lacking more than a half million USD. As you can see, the worst case scenario corresponds to the combined risk for donor funds and project costs we discussed above.
4. Transactions
And now we turn to details about each transaction. For each currency couple you have in your project we provide a detailed view of both results and remaining risk. The analysis is divided into three parts. First up is a bar chart, showing you all transactions for the specific currency couple. Here we are looking at the transactions from SEK to USD in our demo project. Its incoming donor funding. In the bar chart you get visual representation of each financial flow, and both value, result and risk for each transaction.
For SEK-USD we have seven transactions, four that are completed and three planned. The completed have a top part that is either red or green, representing the outcome of that particular transaction compared to budget. Three out of the for completed transactions have resulted in less incoming funds than budgeted, and thus have red tops representing this. One of them was positive, but only about 0,69 % so it’s hard to see the little green top. The three remaining transactions have tops visualy showing you the risk for that transaction. There is a budget line, and above that a colored part showing possible gain. Below is a section dashed section, showing possible loss.
As you can see, due to negative rate movements, there is no hope of a gain for the next transaction.
Below the bar chart are two tables, with detailed data about each transactions. One table showing risk to remaining transaction and one showing results from the completed currency transactions. These provides you with an opportunity to both plan and report financial flows in detail.
5.Currency Management
The full report ends with some short advice on risk management options. These will be expanded in the future, and more importantly, combined with practical solutions that can help to improve your transactions. We are working to include services that target transaction costs as well as currency risk. Stay tuned!
So, let us know what you are missing, what can be explained better, and what you would like to see in our next update!
Originally published at www.aidhedge.org.
