Affiliate Director, Monetary Advisory at Deloitte Ghana, Dennis Brown, has suggested downstream petroleum sector gamers to handle their funds nicely in a clear method to persuade banks and different monetary establishments to finance their operations when the necessity be.
Talking as a panelist on the subject “Trade and Banking” on the just-ended Downstream Petroleum Dialogue organised by the Chamber of Oil Advertising Corporations (COMAC), Mr. Brown stated banks are conscious of the enterprise setting and would subsequently lend solely to companies in sectors they’re certain of recouping their funds.
Amongst different ideas, he suggested the petroleum downstream gamers (Oil Advertising Corporations and Bulk Oil Distributors) to have a powerful working capital construction, fixed provide of petroleum merchandise and good monetary data to guarantee the banks that they might repay their loans.
“You [downstream petroleum players] are working in a margin-driven enterprise and subsequently volumes are key. Can you guarantee the financial institution to doc appraisal info, as an illustration, fixed provide of the product? The product will be described as one that’s inelastic demand whatever the worth and customers will purchase it anyway. So the market is on the market, however in your half, can you assure that you simply get fixed provide to feed the market”.
“When it comes to your corporation mannequin do you do credit score enterprise and when you do credit score enterprise do you will have a sure cycle you comply with? Can you handle your working capital out of the cycle so there are giant establishments that procure merchandise from you and are imagined to pay in 30 days”, he requested.
He additional added “Your financial institution goes to offer you cash, they’re going to have a look at your monetary data. You could current one thing across the venture that’s ahead wanting and the quantity [expected revenue] going ahead seems good, however they are going to validate these assumptions utilizing the historic knowledge that you’ve. That knowledge, the very first thing they might have a look at is how credible it’s. Has the info been ready by way of a clear course of, is it correct sufficient to facilitate efficient resolution making”.
Banks Urged to ascertain Danger Administration Framework for Petroleum Sector
Persevering with, Mr. Brown additionally suggested banks to not shrink back from financing actions of the petroleum downstream gamers regardless of the challenges.
He nevertheless needs the monetary establishments to implement a strong threat administration framework tailor-made for the petroleum downstream sector that would scale back their publicity to losses.
“The consideration is that if banks can get down there [petroleum downstream sector] and develop one thing extra tailor-made by way of the danger administration framework, perceive the sector and transcend and likewise be capable of develop experience internally across the complexities and the technical concentrations in these sectors to have the ability to higher perceive the danger and likewise develop tailor-made merchandise.”
“Extra typically banks see unmitigated dangers alongside the venture appraisal course of and they also elevate their arms, they don’t need to go forward quite than choices obtainable to fulfill these dangers. Can they create one other accomplice [bank to syndicate] on board? Can they create the insurance coverage sector gamers on board?”, he stated.
The Downstream Petroleum Dialogue introduced collectively stakeholders within the downstream petroleum sector to debate pertinent points, share insights and develop actionable methods for trade development and sustainability.
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