Adequate Cash Research Articles

Impacto de los indicadores del modelo SCOR para el mejoramiento de la cadena de suministro de una Siderúrgica, basados en el ciclo cash to cash

El presente artículo, realizado a través de un estudio de caso en una empresa del sector siderúrgico, se apoya en la revisión literaria sobre los indicadores de segundo nivel del modelo SCOR para la gestión de una cadena de suministro. Estos indicadores hacen alusión a la importancia de la planeación de los pagos a los distintos proveedores en una compañía perteneciente al sector de aceros en Barranquilla, Colombia. Para ello, se pretende conocer el impacto que generan en el orden de las finanzas corporativas estos indicadores, siendo el objetivo principal de este artículo demostrar que un buen manejo del ciclo cash to cash en la empresa objeto de estudio coadyuvará a mejorar los índices de liquidez por el impacto que estas variables tienen directamente en el flujo de caja de la compañía. Dentro de los resultados se destaca que las empresas deben garantizar la planeación financiera al momento de cubrir obligaciones que se adquieren con proveedores, permitiendo la optimización de la cadena de suministro y optimizando la labor financiera de la compañía desde la gestión logística. Se propone la optimización en la gestión de cartera para optimizar el flujo de caja de la empresa estudiada.

Specifičnosti izveštavanja o novčanim tokovima u osiguravajućim kompanijama

The activity of insurance and operation of insurance companies is very important in the context of development of financial organizations that operate in the territory of many countries, including the Republic of Serbia. A report that is of crucial importance for insurance companies in the context of an adequate cash flow management is a cash flow statement. Bearing in mind the specificity of the insurance industry, as well as the risks associated with it, cash flow is the basic focus of financial management. For insurance companies, it presents an overview of cash flows that occurred during the previous accounting period. The aim of the paper is to show the importance of efficient cash flow management in insurance companies from the aspect of their planning, and to this effect, the paper provides the simulation of the internal report on cash flows that is done monthly for domestic insurance companies in the function of efficient liquidity management of the insurance company.

Key constraints to labour productivity in residential building projects: evidence from Cambodia

ABSTRACTForeign investment accounts for the largest proportion of project finance in the Cambodia's construction industry, where service providers are increasingly being tasked to be more productive. Low labour productivity has been identified as a major challenge of the country's construction industry. Addressing the constraints to labour productivity in the residential projects is crucial for improving the productivity of the sector. This study aimed to investigate the key constraints to labour productivity in residential projects which are specific to the socio-cultural and operational context of the Cambodia's residential sector. SPSS-based results showed four principal components extracted from 36 labour productivity inhibiting factors: Site management, external, workforce and resource factors. They accounted for 40 per cent, 26 per cent, 16 per cent and 10 per cent, respectively, of the variance that characterized poor labour productivity output in the sector. Forefront players who play active role in the project delivery process could ensure successful completion of projects to time, cost and quality targets by focusing efforts and resources on addressing issues relating to the most influential constraints identified under the four principal components as follows: providing good project leadership, ensuring better management of change orders, eliminating or minimizing defective work and ensuring adequate cash flow.

A study on the algorithm of cash flow forecasting model in the planning stage of a construction project

Recently, due to the global liquidity crisis, construction companies are in bad condition financially. However, by monitoring their cash flows and setting up measures to avoid a liquidity crisis, in a proactive and timely manner, construction companies can manage themselves out of the crisis. This study suggests an algorithm of modeling future cash flow, to be used in the planning stages of projects of construction companies, in order to effectively manage liquidity. Also an algorithm which calculates the optimal cash level by considering elements such as time lags, cost categories and the weights of the cost categories to earned value and budget in the planning stage of a construction project. The algorithm also suggests a forecast of cash flow by comparing the variables of cash-in and cash-out, the output of which is derived through simulations made between such elements as billing time and time lag. Case studies regarding the application of the cash flow forecasting algorithm are also presented. This paper aims to provide a solution for any expected liquidity problems and the implementation of a measure to forecast an adequate cash flow level for construction companies.

Hybrid Swarm Optimization for Cash Management Using Evolutionary Computing

Cash forecasting plays a vital role in any financial organization to maintain the optimal cash balance to satisfy the customer needs on a daily basis without any delay. In the traditional approach statistical methods were used for cash forecasting. Banks have great challenges to avoid the surplus cash as well as to keep adequate cash to meet the customer demand. An intelligent model is needed to identify the cash requirement using cognitive approach. Hence, an evolutionary computing using the hybrid swarm system was introduced for the cash management of a bank. In this study, cash prediction models were developed from the historic short term data and long term data. In order to find the daily cash requirement of financial organization an intelligent hybrid model composed of an Artificial Neural Network (ANN) and a Particle Swarm Optimization (PSO) was introduced. The proposed methodology was capable of training and adjusting the ANN parameters through PSO to improve the efficiency of the cash management model. In a PSO-based ANN model, PSO searches for a set of best weights and biases for an ANN to minimize the error were evaluated using Mean Square Error (MSE). The experimental analysis was made for the selected parameters to maintain the optimal cash. The proposed ANNPSO model has proven its accuracy with the best MSE of short term data was 0.0035 and for long term data was found at 0.0029.

From Finance to Marketing: The Impact of Financial Leverage on Customer Satisfaction

The authors examine how a firm's financial leverage affects marketing outcomes and consequent firm value. They find that leverage has a dual effect: it reduces customer satisfaction and moderates the relationship between satisfaction and firm value. The burden of making regular interest payments to debt holders pressures managers to generate adequate cash flows. The authors theorize that this may lead marketers to adopt short-term actions such as cutting advertising and research-and-development spending, which can hurt customer satisfaction by lowering perceived quality and perceived value. Furthermore, higher leverage reduces financial flexibility by constraining marketers from exploiting growth opportunities resulting from higher customer satisfaction. The authors empirically show that leverage leads to lower customer satisfaction, with advertising intensity mediating this effect. The negative impact of leverage on satisfaction is more pronounced for service firms and firms in competitive markets. Finally, leverage negatively moderates the customer satisfaction–firm value link. Increases in customer satisfaction are value enhancing at modest levels of leverage, but at very high levels of leverage, increases in satisfaction are value reducing.

Profitability and Financial Sustainability Analysis in Italian Aquaculture Firms by Application of Economic and Financial Margins

Agricultural Firms operating in the aquaculture sector in Italy are often characterized by high investment and high capital intensity. In fact, these companies need to develop structures and breeding systems to generate adequate cash flow to repay their investment in fixed assets. In addition, the biological cycle of breeding further extends the need for capital, in this case to finance working capital. There is therefore often a mismatch between the economic and financial cycles, wherein profit margins may differ from financial margins. In this way, such companies have an economic advantage but no sustainable financial cycle. In these cases, several crisis may force companies to default, especially when firns are unable to cover debt repayment. This difficulty is particularly present in Italy, where aquaculture firms are often Small and Medium Enterprises (SMEs) and therefore have greater difficulty than large companies accessing the capital market. Our research evaluates the cost effectiveness and financial sustainability of a sample of forty firms operating in the aquaculture sector in Italy, within a timespan of five years, through comparative analysis of the economic and financial margins. The analysis shows that such firms are capital intensive (TA/VP of median value is 1.16%). Financial debt emerges as the first source of capital then increasing companies’ financial dependence through credit systems and borrowing costs. Firms have a particular absorption in the NWC cycle, with I_DAYS being 143.29 days, AR_DAYS being 72.75 and 145.51 AP_DAYS expressing financial operating cycle (I_DAYS + AR_DAYS - AP_DAYS) with a length of 70.53 days. Profit margins, even if they are correlated with financial margins, are lower on average. The research highlights that economic model worst explains FCFE (F = 0.011 and adjusted R2 = 0.803), while the financial model best explains FCFE (F = 0.000 and adjusted R2 = 0.922). Our research will be further developed through analyzing cooperatives, unincorporated partnerships and sole proprietorships. It may also be useful to undertake a comparative analysis of aquaculture firms operating in other countries of the Mediterranean basin.

WILLFUL DEFAULT IN DEVELOPING COUNTRY BANKING SYSTEM: A THEORETICAL EXERCISE

We construct a sequential game to highlight the incidence of 'willful default' in a developing country banking system where the borrowing unit underreports its true financial position and defaults willfully. Specifically, the paper deals with the implications of willful default for profitability and ultimate loan decision-making process of the banks. It shows that if limited liability condition holds and the conditions of willful default are satisfied, the bank will extend maximum possible amount of loan. However, it also follows that higher the loan capacity of the bank, the higher is the incidence of willful default. These would imply important policy lessons for the regulator. In fact, the regulator faces a trade-off between higher incidence of willful default and higher profitability of the bank. What we observe in reality depends on the objective of the regulator.Keywords: Commercial Banks, Loan Default, Bank RegulationJEL classification: G20, G21, G28(ProQuest: ... denotes formulae omitted.)1. INTRODUCTIONStandard debt contract specifies among other things, the borrower's promise to offer a repayment of loans constant over states, with the bank being allowed to seize the whole cash flow when the repayment cannot be guaranteed. Most of the debt contracts are characterized by asymmetric information between the lender and the borrower which is thought to be the key to the persistent problem of loan default and the resulting accumulation of NPAs in the balance sheet of banks. In the context of debt contract, it may arise, in general, for two reasons. First, it may arise because borrowers who take out loans from the lender usually have much better information than the lender about the potential risk and return associated with the investment project that the borrower plans to undertake. Second, if the actual cash flow generated from the investment project is the private information only of the borrower, then default may arise.The borrowing unit may default 'willfully' for several reasons such as deliberate non-payment of dues despite adequate cash flow, underreporting of cash flow, diversion of funds, siphoning off funds etc. Whatever be the reason, when willful default occurs, this highlights the fact that direct truth revelation does not work in equilibrium debt contract. The literature on costly state verification claims that this kind of moral hazard problem can be solved if the lender can commit to verify ex-post the borrowers' cash flow and/or if the agents can contractually agree on large penalties for those borrowers who strategically default on their debt. In particular, with infinite penalties, the first-best allocation may be achieved. Intuitively, very large penalties provide the right incentive for borrowers to report their financial situation truthfully to the creditor, even if the latter audits only with a very small probability. Consequently, the asymmetric information can be eliminated at a cost, which tends to zero as the audit probability becomes sufficiently small (Becker, 1968). Thus it is easy to prevent untruthful reporting in the auditing zone and, therefore, truthful reporting need not be rewarded. However, following the real life examples, most existing models consider an exogenous upper limit to the penalty that can be imposed to defaulters (see Townsend, 1979; Mookerjee and Png, 1989; Border and Sobel, 1987) or assume that there is limited liability on the part of the borrower (Gale and Hellwig, 1985). Townsend (1979) and Gale and Hellwig (1985) show that debt contract may be so designed that it satisfies the incentive compatibility constraints and the truth revelation of the borrower's cash flow is the dominant strategy and, therefore, standard debt contract appears to be the optimal contract from the efficiency perspective. In contrast, in our analysis of willful default, standard debt contract does not appear to be optimal contract and so, in equilibrium there exists a positive amount of willful default. …

How to handle reliability of (software) systems that fulfill critical roles in society?

In the last 2 weeks, several banking systems in the Netherlands suffered from, what you could consider, problems that seriously affected the Dutch society. When looking into their bank account using online banking systems, invalid entries appeared; valid entries had been removed, balance totals were wrong, and people trying to pay in the supermarket or at other locations had the message ‘invalid balance’ in spite of the fact that there was more than enough money in their account. Also, ordering products online was often impossible, either due to the above problems or simply because the online payment modules were simply unavailable. After a while, one of the cabinet ministers suggested that every citizen should have adequate cash available ‘just in case’. This problem lasted for about 3 days during which the banks offered apologies and several, not always consistent, explanations. After a while, the messages became more consistent, and it appeared that the banks had been suffering from massive ‘Denial of Service’ attacks by, as yet unidentified, hackers. The event is very interesting for professionals in the field of Quality and Reliability. First of all, it demonstrated how strongly modern society depends on modern high-tech (ICT) systems. Although final calculations have not been made, the immediate material damage is certainly over €10m and is probably (much) more. Second, it shows how difficult these problems can be predicted and/or handled. Although these banks have entire departments working on the analysis and prevention of problems such as this, the problems still happen. This is probably the reason that companies are currently also looking for unconventional approaches for the analysis and prevention of problems such as this. It is currently not uncommon that ‘experienced hackers’ are hired as consultants to analyze the vulnerability of critical systems. Although the use of these consultants seems to be quite effective, I wonder whether this is the right way to proceed. Let us, for the sake of argument, assume that this approach is also used in the protection of hardware systems. This would imply that people that have proven experience in damaging third party systems are hired as consultants to prevent exactly what they have carried out before. Ethically, this seems similar to ‘rewarding the offender’. Unfortunately, when dealing with software systems, it seems, at this moment, to be one of the very few effective strategies. Personally, I would be more in favor of a combination of two other strategies: (i) designing systems that are, structurally, far more robust to (deliberate) misuse by others even if this would mean that functionality would be reduced and (ii) developing better methods and models that can analyze the vulnerability of systems under a wide range of (adverse) operational conditions. This means probably a lot of work for us as professionals in this field but, personally, I would prefer this over hiring ’experienced hackers’.

UNDERSTANDING SOIL CONSERVATION DECISION OF FARMERS IN THE GEDEB WATERSHED, ETHIOPIA

ABSTRACTThe aim of this study was to investigate the main factors that influence smallholders' adoption decision of soil conservation measures in the Gedeb watershed. Data from 498 household heads who live in the three districts of the watershed were analysed using the binary logistic regression model. We find that farmers need adequate cash to invest in soil conservation measures. Moreover, farmers would be more encouraged to implement soil conservation measures when they have larger areas of cropland. We explore the possibility that when farmers presume that they have fertile land, they exploit their land more. This hints at the need for extension advice about the benefit of sustainable use of farmers' cropland so that they can maintain their land and pass it on to the future generation. Farmers' awareness about the benefit of land management practices and recognition of the problem erosion is causing on their crop land are central to their decision to adopt soil conservation measures. Furthermore, to adopt these measures, farmers have to be convinced about the effectiveness of these measures. Thus, awareness creation and demonstration of the effectiveness of these measures is essential. Because of the transboundary nature of the problem, policy makers in downstream countries that are suffering from the off‐site impact (e.g. Sudan) would benefit from the information provided and support efforts in the implementation of soil conservation measures. Copyright © 2013 John Wiley & Sons, Ltd.

Determinant Factors of Cash Holdings: Evidence from Portuguese SMEs

Adequate cash levels are fundamental towards smooth operations of firms. Managers have a tendency to hold asignificant share of firms’ assets as liquid assets in order to reinvest on other physical assets, payments tostockholders and to keep cash inside the firm. Cash levels are influenced by firms´ capital structure, cash flow,investments and asset management policies as well as by theirs working capital requirements, and dividendpayments. This paper focuses on analyzing the drivers of cash holdings of non-financial Portuguesemanufacturing small and medium sized companies (SMEs), for the period 2001 to 2007. Results show that firmsize, growth opportunity, relationship with banks, cash flow uncertainty, debt structure, liquidity and leveragehave a significant influence on the level of cash holdings of non-financial SMEs in Portugal.

Structural and behavioural coupling in Business Value-Creating Organizations

The objective of this paper is twofold: on the one hand, to present a coherent framework regarding theformal logic of value production in, or through, organizations (Mella); on the other, to show how the newlogic of Economic Value Added and Activity Based Costing must be united in order to strengthen thecognitive activity of organizations in order to make the production of value maximally efficient(Moisello). The subject matter is developed along the following guidelines:1 – the processes for the production of value are carried out by permanent production organizations, inparticular Business Value-Creating Organizations (BVCO) or “production organizations”), as well as byfor-profit business organizations (or “capitalistic firm”);2 – the production of value takes place through a network of efficient production, economic and financialtransformation processes guided by laws that determine the stable equilibriums;3 – from an internal point of view, BVOCs are operationally-closed systems that are at the same timestructurally and behaviourally coupled to the environment; through (and to the extent of) their owncognitive and computational resources they perceive disturbances such as external stimuli, process these,and act (react or pro-act) to balance the network of vital processes;4 – in BVOCs the internal cognition - data gathering processes, strategies, decisions, planning andcontrols – are carried out by the management, which produces the thought of the organization (rationalcalculations for decision-making, strategies, programmes and controls) from which the organization’s actions derive; the production, economic and financial processes, which are instrumental for theproduction of value, are carried out by the effector organs that produce the action of the system;5 - in this sense BVCOs can be conceived as “conscious cognitive systems” that link themselves to theenvironment through a system of processed, up-dated, and evaluated information which we can define asthe representation of the external world;6 – from an external point of view BVCOs are teleonomic systems that can continue to exist only as longas their performance as systems for the production of value is appreciated by the environment, accordingto a coherent system of performance indicators for the production of value (productivity, quality,economic efficiency, returns, Economic Value Added and Economic Value of the Firm); BVCOs allowmanagers to continually modify the network of autopoietic processes on the basis of the disturbances fromenvironmental changes.7 - the culture of value is diffused, and BVCOs not only have the maximization of value as their objectivebut must translate this into an operative approach to management problems. This approach emphasizesthe capacity of BVCOs to generate an adequate cash flow for new investment and to insure a remunerationat rates that exceed the cost of capital, in order to have available resources for organizational expansion aswell. Management must transform itself into a Value-Based Management (VBM) that must not onlymanage its normal activities but also the value of the organization as a whole;8 –The appearance of new Web-Based Information Technologies that favor and strengthen theglobalization process, as well as the growing role of financial markets, bring out more clearly the problemregarding the application of traditional decision-making, planning and performance-measuring models.This implies a reorientation of cognitive activity toward managerial models that favor the understandingof the driver of value and permit objectives to be set and performance to be measured in a manner whichis coherent with the expectations of stakeholders.

Sources of contractor’s payment risks and cash flow problems in the New Zealand construction industry: project team’s perceptions of the risks and mitigation measures

Little research is focused on payment risks which constitute the biggest obstacle to adequate cash flow and the contractor’s ability to successfully complete a project and maintain a viable business. To minimize risks and improve net cash flow in a project, the various ways in which the key stakeholders could contribute to the contractor’s payment risks and cash flow problems (the ‘problems’) were investigated along with the mitigation measures. Using a two-stage descriptive survey method, pilot interviews were conducted with contractors, subcontractors, project managers, designers and quantity surveyors (the ‘group’). A questionnaire was designed based on the constructs generated during unstructured pilot interviews and used to obtain feedback from 120 members of the ‘group’ through structured interviews. The feedback was analysed for risks using the multi-factor analytical technique. Results showed that employers were the most risky sources contributing 24% of the contractor’s ‘problems’ in a project. The contractors and subcontractors were evaluated as being ‘high’ risk sources contributing 19% and 17%, respectively. The consultants and suppliers were evaluated as ‘moderate’ and ‘very low’ risk sources, respectively, with overall 37% contribution. Ensuring valid payment and variation claims that are supported with well-documented evidence was a key mitigation measure suggested for addressing the critical risk factors attributed to the ‘group’. The findings could guide the project team’s risk management efforts, especially on how to efficiently allocate the available resources to address the risk factors with a view to achieving more satisfactory outcomes and profitability in a project.

Is skill mix profitable in the current NHS dental contract in England?

The use of skill mix in medicine is now widespread, yet it appears that its use in dentistry is not as prominent. Unlike doctors, dentists are required to mitigate the financial risk produced by their capital investment and ensure an adequate cash flow to cover their annual running costs. Examining the financial incentives for employing dental care professionals is therefore an important step to understand why dentistry appears to lag behind medicine in skill mix. It is also apposite, given the announcement of the coalition government to develop a new contract, which could introduce incentives for the use of dental care professionals in this way. The purpose of this short paper is to examine whether skill mix is profitable for general dental practices under the existing NHS contract in England.

Which Sustainable Growth Rate (SGR) Estimator is Better for Managers and Researchers1?

The objectives of this paper is to analyze whether there is a significant difference among widely used Higgins, Van-Hone’s and newly introduced Huang-Liu SGR models and whether these three competing SGR estimates diverge in ways that are systematically related to variations in common financial characteristics. We find that Higgins and Huan-Liu SGR when used as continuous and dichotomous variables are more affected by variations in financial characteristics than Van-Hone’s model. The test of divergences reveals that profitable firms with adequate cash which invest on fixed assets and pay more tax give higher SGR by Higgins than Van-Hone’s. However, a large firm with high leverage gives less SGR by Higgins than Van Hone’s model. Further, we find that more profitable firm with efficient working capital management, effective investment on fixed assets and pay more tax gives higher SGR by Higgins than Huang-Liu model. We also find that more profitable large firm with high leverage, efficient working capital management and investments on fixed assets gives higher SGR by Van Hone’s than Huang-Liu model. Variations of liquidity, debt maturity and financial distress are almost trivial in an economic sense. From the researchers’ point of view, if both continuous and dichotomous variables are used in the analysis, it is better to choose Van Hone’s sustainable growth. Finally, we find that the Huang-Liu model induces more sample-selection bias as a result of loss of sample size. We suggest that Higgins and Van-Hone’s models are preferable both managers and researchers point of view.

Resource-constrained construction project scheduling model for profit maximization considering cash flow

Regarding project scheduling problems, resource-constrained issue is generally considered essential for contractors as a means. Researchers have thus devoted considerable efforts to investigating this issue over the past decade. Furthermore, since adequate cash flow management benefits cost control and assists profit acquisition for contractors, numerous techniques have recently been developed for project scheduling in situations involving cash flow. However, most of these studies simplified resource utilization, and assumed that cash out flows are directly related to activities without considering resource usage. Fundamentally, resources incur activities' costs, project cash flow, which conforms to resource utilization. It is thus regarded as a main issue in this study. This study establishes a resource-constrained project scheduling model based on constraint programming, whose solution can be found by using combinatorial optimization algorithms. The proposed model integrates the issues involving resource-constrained problems and cash flow, and maximizes net project cash flow to optimize project profit from the perspective of contractors. Model validation and two scenarios, including multi-resource, resource combination selection, and various constraints such as resource limit, are performed to demonstrate the model capability and applications. Contractors thus can evaluate appropriate project schedules under associated constraints, and arrange activities and resources to maximize project profit.

HUBUNGAN PROFITABILITAS DAN DIVIDEN TUNAI DENGAN ICECUKUPAN KAS DAN LIKUIDITAS SEBAGAI MODERATING VARIABLE

The objective of this research is to determine the relationship between profitability and the amount of cash dividend policy. However this research examines the influences of cash adequate and liquidity (current ratio)toward the relationship between profitability and cash dividend policy. We call the influence as moderating variables. In general, investors have primarily objective that is to increase their wealth by return as dividend or capital gain. On the other hand, the companyexpects continuous growth and its going concern, also increase its stockholder's wealth. Factor that pre­dicted influencing dividend distribution amount in this research are focused on profitability. Thus, profitabiNy influences cash dividend policy in a company. However cash dividend should be paid only when a company has adequate cash and good liquidity ratio. This research examines financial statement of several companies are listed at Jakarta Stock Exchange for period ended December 31, 2000 until December 31, 2003. Data is collected from Jakarta Stock Exchange and Indonesia Capital Market Directory 2004. This research uses statistical software TViews version 4,1 ''. The result is cash adequate and liquidity moderate relationship between return on investment and cash dividen policy. On the other hand, return on equity has not significant relationship with cash dividend PolicyKeyword : profitability, cash dividend, cash adequate, liquidity

Cash Reserve and Venture Business Survival Probability

Both solid business ventures and those not on as firm a footing can fail because they do not manage risk properly. This study shows that start-ups with a positive NPV project can fail because of inadequate cash reserves. We apply the first-hitting time model to analyze the effect of a cash reserve on the business failure density function and the cumulative failure probability for a specific business venture. The analysis of this model shows that business ventures have a much higher survival probability when they reduce their future cash-flow volatility. It is also shown that when risks cannot be controlled or are too expensive to be controlled, then business ventures need to have adequate cash reserves if they are to reduce failure density and cumulative failure probability.

Trends and factors of assets and capital in enterprises of primary agricultural production

A smooth entrepreneurial activity requires adequate cash flows. This need is quantified due to the special position of primary agricultural production. The required volume, structure, quality and availability of financial resources creates economic framework for decision making and managing entrepreneurial activities. The results show the lack of total capital in connection to the needs of investment processes and ensuring operational activities in the selected enterprises. Both legal entities (agricultural cooperatives and business enterprises) decreased the total volume of assets and total liabilities in 2004. The economic result was improved in both types of legal entities, in the case of cooperatives by 3 525 SKK/ha a.l. and in business companies by 1 840 SKK/ha a.l. Receivables and payables also decreased, cash flows from business activities have increased. There is a decrease in the balances of the existing loans and new loans were provided by commercial banks for enterprises in primary agricultural production.

Oil Project Financing

The level of participation of Nigerians as sponsors of oil projects is at best negligible when viewed from the size of the market and the level of participation of multinationals. This may not be unconnected with the nature of the market and the risk-averse nature of financiers, especially on the issue of completion. The ability of oil projects to generate adequate cash flows to service their project debt depends on the completion and performance of those projects according to specifications. Because lenders usually are not prepared to assume the risk of such completion, sponsors are often required to furnish some sort of guarantee, which commits the sponsors to input additional capital to the project in the event of cost over-run or to pay all or part of the project debt upon failure to attain completion. However, the hallmark of the adoption of project financing arrangements by the sponsors is the limitation of recourse and the sharing of risk. Such completion guarantees could turn non-recourse or limited-recourse into full-recourse financing from the sponsors9 perspective. This article explores the prospects of options available to project sponsors to mitigate their obligations under completion guarantees in the context of oil project financing. In advancing this analysis, the article examines the nature of oil projects in relation to project financing, looks at the relevance of completion in the repayment of the project debt, and reviews lenders9 aversion to assuming completion risk and their requirements from project sponsors in mitigation. <b>TOPICS:</b>Project finance, emerging markets, credit risk management