WDPG App 4 QRG: the business and operating models

To analyse the business and operating models effectively, a firm should:

1. (1)

   place emphasis on understanding how its balance sheet generates profit and loss and the details of operations;

2. (2)

   carry out a review of the sources and uses of both its capital and liquidity by reviewing, among other items, revenue drivers, cost drivers and sources of cash inflows and outflows;

3. (3)

   consider which areas may be difficult to wind down, e.g. due to longer notice periods of some employees, certain transactions or contracts with third parties that are subject to a longer cancellation period; and

4. (4)

   consider internal and external connectedness, i.e. the dependencies the firm has on other parties or group members and the dependencies others have on the firm.