# MIP39c2-SP27: Adding Strategic Finance Core Unit (SF-001) ## Preamble ``` MIP39c2-SP#: 27 Author(s): @Aes Contributors: @SebVentures Tags: core-unit, cu-sf-001, mandate Status: Obsolete Date Proposed: 2021-12-01 Date Ratified: 2022-01-24 Forum URL: https://forum.makerdao.com/t/mip39c2-sp27-adding-strategic-finance-core-unit/11938 Ratification Poll URL: https://vote.makerdao.com/polling/QmZn66qt Extra: Superseded by [MIP39c2-SP36](https://github.com/makerdao/mips/blob/master/MIP39/MIP39c2-Subproposals/MIP39c2-SP36.md). ``` ## Sentence Summary MIP39c2-SP27 adds Core Unit SF-001: Strategic Finance Core Unit. ## Paragraph Summary MIP39c2-SP27 adds Core Unit SF-001: Strategic Finance Core Unit. Its mission is to provide financial reporting and analysis to assist the DAO in evaluating the financial health of the protocol to enable strategic decision making and allocate capital more effectively. ## Specification ### Motivation I joined the DAO almost exactly a year ago, initially as an investor to learn more about the project and direction of the DAO. I was particularly interested in the RWF CU and after discussing my background with @amyjung, she recommended I connect with @SebVentures. As I continued to get more and more involved in the community and working with Seb, I saw tremendous opportunity to add value through building out the financial foundation Seb laid down. The intellectual curiosity, openness, and desire of the DAO to create and grow a more robust, transparent, and secure financial system is deeply motivating. Adding in the mandate to fight the most challenging problem humanity has faced - climate change - and I could not be more excited to do everything I can to support the DAO and its mission. ### Core Unit ID SF-001 ### Core Unit Name Strategic Finance ### Core Unit Facilitator Mark Phillips (@Aes) ### Core Unit Mandate #### Mission Provide financial reporting and analysis to assist the DAO in evaluating the financial health of the protocol to enable strategic decision making and allocate capital more effectively. #### Vision Our vision is to provide the most accurate and clear financial reporting across the entire crypto industry, leveraging the transparency and immutability of the public blockchain to ultimately provide financials data that exceeds the requirements of IFRS (International Financial Reporting Standards). Additionally, we seek to provide the DAO and MakerDAO stakeholders with relevant financial information to help assess the health of the protocol. We will accomplish this by: - Providing clear, easily digestible financial information to the DAO that enables stakeholders to make informed decisions for the protocol - Building financial dashboards and tools that provide real-time financial data directly from the blockchain so stakeholders can understand the health of the protocol - Partnering with SES to implement standardized and automated expense reporting vs budgets - Collaborating with Growth and Risk Core Units to provide financial analysis of prospective deals - Working with the Protocol Engineering and Oracle Core Units to model growth opportunities and risks - Asset-liability management and innovation through investing protocol assets to generate yield (real-world assets, DeFi, etc.) - Facilitating recurring strategic reviews to set a strategic action plan and - Accounting, solvency, liquidity, and potential regulatory reporting ### Strategy & Current Work SF encompasses the traditional finance functions, including financial reporting, planning, analysis, and accounting, as well as an advisory component that helps facilitate consensus around the DAO's strategic priorities. This work, as detailed below and in the 'RWF Efforts' section, will be continued with the approval of the SF Core Unit. This work includes but is not limited to: - Publishing Monthly Financial Statements - Posting Monthly Financial Reports - Reporting Actual Monthly Expenses & Forecasting by Core Unit - Partnering with GRO-001 Facilitator @Nadia and RISK-001 Facilitator @Primoz to negotiate terms for the Nexo Institutional Vault as well as another 600M+ undisclosed prospective IV customer - Maintenance of the Real-Time Financial Dashboard - Forecasting Revenue and Profitability - Analyzing Profitability by Vault - Building new SQL queries to support the Strategic Focus Areas for the Recurring Strategy Reviews and KPIs Our approach to working with the DAO is focused on collaboration. We believe partnering with the other Core Units and MKR holders, with each bringing our strengths and expertise to the table will yield multiplicative benefits compared to working purely in silos. This does not mean the Core Unit is dependent on other Core Units to execute the current work and envisioned scope; only that results will be maximized through collaboration. This collaboration is already happening today and will only get better moving forward. ### Roadmap The SF CU will initially focus on continuing to build a solid financial reporting foundation and continue its work on the [RWF FP&A roadmap](https://forum.makerdao.com/t/rwf-financial-planning-analysis-roadmap/9756), prioritizing work based on community feedback. The current roadmap includes: - Create a Strategic Action Plan (STRAP) to develop plans to achieve DAO-wide long-term goals by facilitating: - Determining the protocol's strategic position - Prioritization of Objectives - Developing & formalizing the strategic plan - The assessment of executing the plan - The review and revision of the plan as necessary - Facilitate recurring Strategy reviews to: - Assess how CUs are executing the mission and agreed-upon strategy - Understand issues and obstacles the DAO needs to address - Discuss new opportunities that have arisen that the DAO may want to pursue - Decide if adjustments to the plan are needed - Facilitate optimal capital allocation - Partnering with SES to standardize and automate expense reporting across the DAO - Increase transparency and reporting standards to provide more accountability to CU spend - Build out 'Governance Relations' by partnering with CU leadership to frame and communicate MakerDAO's strategy, operations & financial results to the community - Asset-Liability Management: - Reporting of the current and future balance sheet structure in terms of interest rate, duration, maturity and profitability - Researching and proposing ways to optimize the balance sheet allocation - Providing insights into [borrower risks](https://forum.makerdao.com/t/borrowers-concentration-analysis/12014) and analyzing customer capital flows - Financial Reporting & Planning - Monthly Financial Reports - Monthly Expense Reports - Monthly Revenue & Expense Forecasts - Budgeting support through building Budget Templates and providing expense analysis to CUs - KPI dashboard - Building real-time dashboards leveraging on-chain data to measure DAO-approved Strategic Focus Areas and Key Performance Indicators - Real-time Vault Profitability Analysis ### Community Involvement - Educate community members in understanding the protocol, its economics, and risk aspects - Develop models for community members - Review community proposals - Provide feedback on business decisions ### Team Structure The full team and current budget will be composed of 4 permanent members: - 1 Finance & Strategy Facilitator - @Aes - 1 Title TBD - @SebVentures - 1 Senior Finance Manager - 1 Senior Data Analyst Long-term, we will expand the team to 7 permanent members to include: - 1 Senior Financial Analyst - 1 Accounting Manager - 1 DAO Auditor ### RWF Efforts As part of the RWF CU, the team has already delivered a number of reports, models, and financial analyses, including: - [Monthly Financial Reports](https://forum.makerdao.com/tag/financial-report) - [Monthly Financial Statements](https://docs.google.com/spreadsheets/d/1Na_PP8JHIc7Nwy2-pUW_YHY4hatS34DoUML8QI21lVs/edit#gid=526782600) - [Real Time Financial Dashboard](https://dune.xyz/SebVentures/maker---accounting_1) - [MakerDAO Expense Reporting](https://forum.makerdao.com/t/makerdao-actual-expenses-vs-budget-september-2021/11525) - [MKR Compensation Model](https://forum.makerdao.com/t/mkr-compensation-financial-model/9038) - [A Framework for Valuing MKR](https://forum.makerdao.com/t/a-framework-for-valuing-mkr/7442) - [Institutional Vault Financial Analysis](https://forum.makerdao.com/t/institutional-vaults-economics-terms/9989) - [Budget Simulator with Revenue & Cash Flow Forecast](https://forum.makerdao.com/t/makerdao-budget-simulator-as-of-7-21-21-revenue-cash-flow-forecast/9469) - [Key Performance Indicator Discussion](https://forum.makerdao.com/t/discussion-makerdao-key-performance-indicators-kpis-capital-allocation/7863) ### Domain Evolution The Strategic Finance Core Unit aims to build a solid financial foundation for the DAO that enables the creation and growth of other specialized financial Core Units with expertise in diverse areas of finance. Some examples include Corp Dev (M&A), Asset-Liability Management, Treasury, Accounting, Audit, and Governance Relations.