Cost Transparency: Joint Ventures Best Practise

The latest KPMG GEI business club centred around Cost Transparency and Joint Ventures in the Energy & Natural Resources (ENR) sector.

15 June 2015, 00:00AM - 12:00PM, WIB

Hosted at the prestigious Mulia Hotel, Jakarta, senior executives from across Indonesia’s ENR sector joined KPMG experts at the topical workshop event.

In a period dominated by commodity price and investment uncertainty, Joint Ventures (JV’s) continue to be a critical node of business strategies in the ENR Sector. Building and delivering a successful JV programme however has become increasingly challenging with the growing complexity of JV arrangements.

This workshop explored how major companies can adapt their approach to hold on to existing JVs, protect value and ensure that they continue to undertake business in areas where JVs are the only means of access.

The importance of Cost Transparency

Mark Elia, Director for ENR, KPMG in Singapore, outlined core measures that JV projects should adopt. He cited the importance of aligning operations to Board expectations and the benefits of establishing appropriate committees to oversee current and future activities.

For successful and sustainable JV projects, Mr Elia highlighted the need for robust expense controls and clarity between cash calls and JV agreements, including the scheduling and amounts. Finally, due to the multitude of risks associated with JV operations, the capacity to manage risk and ensure business continuity in the event of an incident was flagged as an essential pillar in delivering an effective JV project. The presentation also gave insight into infrastructure development challenges, outlined the building blocks to successful project execution and pointed out the traits of successful cost management across the value chain of JV project development.

Joint Ventures: Best Practices and Trends

Brad Johnson, Director of Joint Ventures, KPMG in Singapore gave insight into the proliferation of JV arrangements in the ENR sector. He argued that increasingly JVs have been formed for strategic purposes rather than because of necessity. To exemplify the growth of JVs, an estimated 5000 new JVs have been established in the last five years, with the 100 largest exceeding a value of US$350 billion.

Mr Johnson highlighted the common pitfalls that often undermine the success of JV arrangements and subsequently pointed out various measures companies can adopt to decrease the risk of sub-optimal performance. Crucially, he emphasised the importance of building a robust and practical operating model. Ultimately, Mr Johnson stressed the importance of acknowledging that JVs are partnership models, based on mutual understanding and cooperation, they are not subsidiary driven vehicles.

Survey Results

The executive audience participated in the workshop through completing a survey. Questions were based around the themes of the two presentations. In sum, the answers reflected that business executives are embracive of a cost conscious culture; but, more often fail to see how exactly costs impact their business model and JV arrangement.

A post-event report (PDF 1.22 MB) is available for download.

The survey (PDF 528 KB) and subsequent analysis is available for download.

For further information please contact:

Tim Rockell in Singapore

+6565071998

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