2008 business plan and budget

Executive summary

The formulation of the business plan and budget for 2008 reflects the third year of the implementation of the Bank’s third Capital Resources Review strategy and framework(CRR3), which covers the period 2006 to 2010.

Context

The CRR3 medium term resource framework reflects a rising portfolio in a more complex operating environment and a sustained focus on efficiency and internal resource reallocation. The implementation of the CRR3 strategic objectives is proceeding at a strong pace. Together with an enhanced quality of projects, reflected in rising transition impact indicators, the number and the volume of operations, the pace of disbursements and the share of equity have all grown strongly.

Reflecting the transition challenges ahead and experience with the implementation of the CRR3 business model since 2006, the 2008 business plan pursues the following objectives:

• The Bank will continue to support the development and diversification of the corporate sector in the countries of operations as a major driver of transition, economic growth and employment. Within this objective, the Bank will develop opportunities to improve governance, energy efficiency and environmental performance.
• The Bank will pursue a broad and active approach to the strengthening of the financial sector in the countries of operations within a more complex and volatile financial markets environment.
• Taking account of the increasing emphasis on infrastructure development in the region of operations, the Bank will actively pursue the development of its pipeline of operations in the transport, power and municipal sectors. This will include both the use of a broad range of products, including PPPs (Public-Private Partnerships), and deriving the energy efficiency benefits which can be achieved in a number of infrastructure sectors particularly power, district heating, public transport and housing.
• Responsiveness to clients and innovation are key drivers of transition impact and business results. In this context the Bank will continue to develop specific products and approaches within each business segment of the Bank aimed at enhancing transition impact and responding to the evolving needs of clients.
• Energy efficiency can make a strong contribution to economic competitiveness and energy security. The Bank’s Sustainable Energy Initiative which was launched in May 2006 reflects the increasing importance of energy issues across the region of operations of the Bank and the rising concern with global climate change issues.
• The effective redeployment of staff combined with strong leadership can lead to significant results within short periods of time as reflected in the quality and growth of the Bank’s work in Russia. This success needs to be replicated in other regions of the Bank in order to support a continuing balanced growth of the portfolio. Accordingly the 2008 Business Plan and Budget places a specific emphasis on the effective deployment and reallocation of staff across countries and sectors to support a balanced growth of the portfolio ensuring in particular activity growth in Ukraine, the ETCs (Early Transition Countries) and the Western Balkans.
• The Bank will give priority attention to the retention of high performance staff and recruitment of staff with the required qualifications and experience.

Business plan objectives

The objectives within the business plan and budget for 2008 include:

• a net portfolio growth objective of EUR 1.4 billion
• an underlying base case annual business volume objective of EUR 5.2 billion, with a high transition impact target
• net operating asset growth base case objective of EUR 0.8 billion with underlying base case disbursements of EUR 3.6 billion supporting the continued build-up of the operating assets base of the Bank
• a net income base case objective of EUR 550 million

Budget

The 2008 budget increases by 2.1 per cent in real terms from the 2007 budget.

The 2008 business plan and budget places a specific emphasis on the effective deployment of staff and managerial capacity across countries and sectors in order to support a balanced growth of the portfolio in line with the CRR3 strategic objectives.

The weakening of the Bank’s competitiveness and attractiveness as an employer, in job markets in both London and in several countries of operations, continues to require targeted recruitment efforts and compensation to ensure that the Bank can attract the necessary professional skills across functions and departments.

The approved 2008 staff compensation and benefits proposals aim to reward individual performance and reduce the gap with the market within a reasonable overall resource framework. They include:

• a total 7.10 per cent provision for headquarters based staff;
• a total 12.0 per cent provision for resident office based staff; and
• a bonus pool at 16.5 per cent of total professional payroll