Cost-Benefit Analysis Framework
Learning Objectives
Identify all cost categories for implementations
Quantify benefits including hard savings
Build comprehensive business cases
Calculate ROI and payback periods
Design ongoing measurement
ONE-TIME COSTS:
- Project management: $20-50K
- Technical integration: $30-100K
- Legal/compliance: $15-50K
- Training: $5-15K
- Vendor fees: Varies
- Consulting: $20-100K (if used)
- Audit support: $10-30K
TOTAL IMPLEMENTATION:
Simple: $50-100K
Moderate: $100-250K
Complex: $250-500K+
ANNUAL RECURRING:
- Transaction fees: $5-25/transaction
- Platform fees: $24-100K/year
- Spreads: 0.3-1.5%
- Staff time: $25-100K (0.25-1.0 FTE)
- Technology: $10-30K
- Compliance: $10-25K
- Audit: $10-25K
TOTAL ONGOING:
Low volume: $75-150K
Moderate: $150-300K
High: $300-500K+
FREQUENTLY OVERLOOKED:
- Opportunity cost (stablecoin @ 0% vs MMF @ 4%)
- Management attention
- Learning curve (3-6 months)
- Change management
RECOMMENDATION:
Add 20% contingency to all estimates
FX COST REDUCTION (ODL):
Annual Savings = Volume × (Current Rate - ODL Rate)
Example:
$10M × (2.5% - 1.0%) = $150K savings
WIRE FEE ELIMINATION:
Savings = Transactions × (Wire Fee - Digital Fee)
Example:
500 × ($40 - $10) = $15K savings
NOSTRO REDUCTION:
Benefit = Freed Capital × Return Rate
Example:
$2M × 4% = $80K annual benefit
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EFFICIENCY GAINS:
Staff Time Savings:
Hours saved × Loaded rate = Annual savings
Example:
780 hours × $75 = $58,500
Working Capital:
Float reduction × Rate = Benefit
Example:
$1M freed × 4% = $40K
- Competitive advantage
- Risk reduction
- Scalability
- Innovation positioning
Present qualitatively, not in NPV
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BASIC ROI:
ROI = (Annual Benefits - Annual Costs) / Implementation
Example:
($200K - $80K) / $150K = 80% ROI
PAYBACK:
Payback = Implementation / Net Annual Benefit
Example:
$150K / $120K = 15 months
NPV (3-year, 10% discount):
Year 0: -$150K
Year 1: $109K
Year 2: $99K
Year 3: $90K
NPV = $148K
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THREE SCENARIOS:
Conservative: Benefits 70%, Costs 120%
Base: As projected
Optimistic: Benefits 120%, Costs 90%
Present all three
Focus on base case
Show viable even if conservative
BUSINESS CASE SECTIONS:
1. Executive Summary (1 pg)
2. Current State (1-2 pg)
3. Proposed Solution (2-3 pg)
4. Financial Analysis (2-3 pg)
5. Risk Assessment (1-2 pg)
6. Implementation Plan (1-2 pg)
7. Recommendation (1 pg)
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- Actual vs. projected savings
- Cost per transaction
- Transaction volume
- Settlement time
- Success rate
- Efficiency (hours/transaction)
- Policy compliance
- Audit findings
CADENCE:
- Volume, cost, exceptions
- Cumulative savings
- Variance analysis
- Full year review
- ROI achievement
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MID-SIZE MANUFACTURING:
Current: $24M cross-border, 2.8% cost = $700K/year
Implementation: $96K
Ongoing: $82K/year
Benefits: $510K/year
Net Annual: $428K
ROI: 446%
Payback: 2.7 months
3-Year NPV: $970K
Even conservative case: NPV $580K
Recommendation: Approve
- Executive summary
- Current state analysis
- Proposed solution
- Financial analysis with scenarios
- Risk assessment
- Implementation plan
- Measurement approach
Time Investment: 5-6 hours
1. Contingency percentage?
Answer: 20%
2. Payback for $150K implementation, $100K benefit?
Answer: 18 months
3. Why scenario analysis?
Answer: Shows viable under conservative assumptions
4. Primary hidden cost for stablecoins?
Answer: Opportunity cost (foregone interest)
5. Board reporting frequency?
Answer: Annually
End of Lesson 11
Course 57: Corporate Treasury with Ripple Products - Lesson 11 of 15
Key Takeaways
Identify ALL costs
- including hidden
Quantify conservatively
Present scenarios
- not just base
Measure continuously
Under-promise, over-deliver
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