Question

Will financial advisers find more ways to inject more formulaic approaches into the process and thereby reduce the enormous transaction costs of project finance?

Answer 1

Yes, there is a high chance that financial advisers will find more ways to inject more formulaic approaches into the process and thereby reduce the enormous transaction costs of project finance.

Going forward financial advisors will implement and make use of increased level of formulaic approaches into the process with the intention of reducing the need for information and monitoring. Once a formulaic approach reduces the need for information and monitoring then the transaction costs will automatically decline from their present high level. Secondly focused used of formulaic approaches will reduce the premiums for country and political risks and this will reduce the margins for project financing with regards to projects in high risk countries. Lastly use of more formulaic approaches will reduce the enormous transaction costs of project finance as it will reduce the costs of lengthy documentation and longer gestation period.