Executive Summary The Finance Team is responsible for all financial modeling and analysis of the observations and

recommendations of the Process,Organization, Technology, and Communications teams in the XYZ BPE project. Members of the team included representatives fromXYZ, Finance and Administration, and Company ABC.The key deliverable of the team is the Cost-Benefit Analysis, illustrating the estimated impact of implementing the recommendationsof the XYZ BPE project teams. The analysis is illustrated using two key models: A forecasted Cash Flow Analysis; and, A forecast of XYZs Operating Expenditures for the budget years 1994/95 to 1995/98.It is important to note that the analysis is not a definitive and/or detailed study of all the costs and all the benefits. It quantifies, at ahigh level, recommendations having the largest financial impact, their value, and their timing. All budget forecasts are based on theestimated results of this project only and do not anticipate the costs and benefits of other XYZs projects and initiatives. For thesereasons, it must be seen as an input only to future XYZ Budgets.The XYZ Operating Expenditures Forecast is particularly important as it measures the progress against one of the key performancemeasures of the XYZ BPE project, outlined by the Deputy Minister at the Project Design Meeting in August: a significant reduction in the cost base of the XYZ Division from existing levels Here, existing levels have been defined as the XYZ 1994/95 Operating Budget and, to permit more accurate comparisons to date, theForecasted Operating Expenditures for 1994/95 as of September.During the re-design phase of the project, the Finance Team was responsible for helping the other teams to quantify, in financial terms,the impact of their recommendations so that they may make choices based on the performance measures of the project. At thecompletion of the Transition Workshop, the value and timing of each of the major costs and benefits were finalized and incorporatedinto the Financial Model for analysis. The result is the forecasted operating expenditures for the budget years 1994/95 to 1997/98.This report provides a complete Financial Analysis of the XYZ BPE Project. To enhance decision-making, several variations of the analysis are represented to demonstrate financial impact under the following assumptions: Base Case - the best, most realistic, estimates provided by each of the teams; Cost + 25 - a case in which costs are increased by 25% to estimate the impact of significant cost overruns; Benefit - 25 - a case in which benefits are decreased by 25% to illustrate the impact if benefits have been overestimated; Redeployment - a case in which some employees are redeployed by the government thereby reducing severance costs; and, Late Completion - a case in which projects on the critical path are assumed to take one quarter longer than expected producing an overall delay of 6 months for complete implementation.. The % change (reductions expressed in parentheses) in the XYZ Total Operating Expenditures, from 1995/96 to 1997/98, versus the1994/95 Baseline Operating Budget for each case is provided in the table below: Case 1995/96 1996/97 1997/98 Base Case (0%) (14%) (45%) Cost + 25 1% (12%) (43%) Benefit - 25 1% (5%) (34%) Redeployment (3%) (22%) (45%) Late Completion (5%) (7%) (32%) It is the opinion of the Finance Team that these results fairly represent the estimated costs and benefits resulting from the implementation of the recommendations of each of the XYZs project teams. Based on these results, the Finance Team recommends that XYZ proceed with the implementation of the project recommendations in partnership with a systems integrator able and willing to finance the investment in technology necessary to realize the long-term benefits of the change.

Financial Model Review The work of the Finance Team began with the development of a Financial Model - a framework for analysis identifying the major costand benefit drivers of the XYZ Division. In the end, two frameworks were developed: The Forecasted Operating Expenditure Model to indicate progress against the stated financial performance measure; and, The Cash Flow Model to illustrate the financial impact in a format easily understood by business and financial institutions.Each model shares the same cost and benefit categories and the same estimates of financial impact provided in association with theother BPE Project teams; the only difference is the final presentation of the numbers.The major sources of cost and benefit detailed in the Financial Models are: One-time Impact Severance and Outplacement Information Technology Supplies and Services Savings Acquisition Information Technology Custom Software Development Maintenance Costs Project Management Operating Costs Communications Telecommunications Costs Training Outsourcing Costs Consulting Human Resources Implementation Management Periodic or Annual Impact

Manpower Reductions