Strategic commercial interventions: business case development principles

1. Principles for developing a Business Case

1.1 Rationale

The development of a robust business case is an important stage of the decision-making process when considering a financial intervention into a distressed business. The process of developing a business case will help to set out the rationale for SG intervening, the intended outcomes and crucially the best route to deliver this.

The SPFM provides clarity by defining a business case as a document that “provides justification for undertaking a project, in terms of evaluating the benefit, cost and risk of alternative options and rationale for the preferred solution, against which continuing viability is tested. Its purpose is to obtain management commitment and approval for investment in the project”.

1.2 Background and Purpose

As part of an evaluation of a previous Scottish Government financial intervention, a key recommendation was made in relation to developing a “streamlined [appraisal] process…to allow SG to quickly assess requests in time-pressured situations”.

Whilst it is important to provide decision makers with a full options appraisal to support an investment decision, it is recognised that in certain rare circumstances investment decisions are required to be made ‘at pace’. Such instances could relate to providing financial support to a business to support critical national infrastructure, or secure jobs in a strategically important industry where there is an immediate liquidity problem.

This guidance therefore looks to provide direction on developing business cases in general for commercial interventions, but judgement will need to be applied where there is time pressure on the essential aspects to focus on. This guidance is not intended to replace existing guidance on business case development within HMT Green Book, HMT guidance on how to develop business cases for projects and programmes and the Scottish Public Finance Manual. It will instead distil and summarise key aspects of this, providing useful links and direction on Scottish Government governance and sign-off to ensure as an efficient process as possible.

The intended audience is colleagues considering financial interventions, most notably those in Strategic Commercial Assets Division (SCAD). However. the principles can be applied to other areas of SG and the wider public sector.