It is important to identify the extent to which the project will be exposed to financial risks such as foreign exchange (FX) and/or interest risks. If a material amount of goods or services are likely to be sourced from foreign jurisdictions, variations in the exchange rate between Australian dollars and the foreign currency in which these goods and services are denominated could lead to fluctuations in the project cost and, in extreme cases, jeopardise the affordability of the project. Material FX risks should be highlighted in the Business Case as early as possible, provided for through the project's contingency provision, and continually monitored throughout project procurement. Any material FX risk should also be flagged with TCorp, facilitated by NSW Treasury, to determine if hedging is appropriate.
NSW Treasury has introduced financial risk policies to assist Agencies with managing their risks, for example TPP21-14: NSW Government Financial Risk Management Policy5. The policy:
• sets out principles and requirements that align with the GSF Act and Fiscal Responsibility Act (NSW) (FRA) 2012
• helps Government Entities to identify and assess their own financial risk exposures; and
• promotes efficient and effective oversight arrangements for the whole-of-State through NSW Treasury and TCorp.
The Responsible Agency should consult NSW Treasury when the project is, or is likely to be, exposed to financial risks.
The Responsible Agency should develop the Financial Impact Statement (FIS) in a Cabinet Submission in consultation with NSW Treasury to summarise all financial information for a likely PPP. The FIS must be reviewed and endorsed by the Responsible Agency's CFO and NSW Treasury prior to seeking Cabinet approval.
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