Investment Committee Memo Template
Executive Summary
Key Takeaways
- ✓ A committee memo should present model risk as its own section, not fold it silently into the headline return figures.
- ✓ The memo should state plainly whether the model has been independently audited, and if so, to what scope.
- ✓ Material findings that affect return figures should be flagged even if they have since been remediated.
- ✓ A memo that omits model audit status leaves the committee to assume the model is reliable without evidence.
- ✓ This template complements, not replaces, the underlying audit report itself.
Purpose¶
An investment committee memo is built to help a committee decide. Most memos are strong on commercial narrative, market context, and headline return figures, and weak, or silent, on a distinct question the committee actually needs answered: has the model producing those return figures been independently checked.
This template gives that question a defined place in the memo, so model risk is presented as a specific, evaluable input to the decision rather than an implicit assumption buried inside the numbers.
Who Should Use This Template¶
- Investment committee secretariats and deal teams preparing memos for committee submission.
- Advisory firms supporting a client's investment process who want model audit findings to reach the committee in a usable form.
- CFOs setting a standard for what a complete memo should contain before it is submitted internally.
Template Structure¶
- Deal Summary — the opportunity, structure, and headline terms.
- Commercial Thesis — why the opportunity is attractive, independent of the model.
- Financial Summary — the key output figures (IRR, DSCR, NPV, or equivalent) as produced by the model.
- Model Audit Status — a dedicated section stating explicitly: - Whether the model has been independently audited, and by whom. - The audit's overall risk score and scope. - Any material findings, remediated or outstanding. - Any findings that affect the headline figures in Section 3.
- Risks and Mitigants — commercial and structural risks together, distinguishing which category each risk belongs to.
- Recommendation — the deal team's recommendation, referencing the model audit status where relevant.
How to Use It¶
Keep Section 4 short and specific. A committee member should be able to read four or five lines and know: was this model checked, by whom, what was found, and does anything remain open. Reference the full audit report as a supporting document, using the structure described on the Financial Model Audit Report Template, rather than reproducing its findings log in full inside the memo.
Where a finding affects a headline figure in Section 3, state this explicitly next to the figure, not only in Section 4, so the committee cannot read the financial summary in isolation from the model risk it carries.
For project finance and infrastructure deals, extend Section 4 to reference debt sculpting and covenant verification, consistent with the Project Finance Model Audit pillar page. This memo structure aligns with the checks described in the Investment Committee Model Checklist.
Common Pitfalls¶
Silence on audit status. A memo that never states whether the model was independently checked leaves the committee to assume it was, without evidence.
Burying findings in an appendix. If a material finding affects the headline return figure, it belongs next to that figure, not several pages away in fine print.
Treating model risk and deal risk as the same category. A strong deal thesis does not offset a structurally unreliable model, and conflating the two in the memo obscures a distinction the committee needs to make its own judgement.
Reproducing the entire audit report. The memo should summarise; the full findings log belongs in the audit report itself, referenced as a supporting document.
Continue Reading¶
Related Pillars¶
Related Glossary¶
Related Checklists¶
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Frequently Asked Questions
Why should a model audit summary be included in an investment committee memo?
Because a committee approving a deal is implicitly approving the model's output, and without an explicit statement of the model's audit status, the committee has no way of knowing whether that output has been independently verified.
What is the difference between the deal thesis section and the model risk section?
The deal thesis addresses whether the opportunity itself is attractive. The model risk section addresses whether the numbers supporting that thesis were calculated correctly, a distinct question covered on the Model Risk pillar page.
Should unremediated findings be included in the memo?
Yes, particularly if they are material. A committee should not approve a deal on the basis of numbers known to contain an uncorrected structural error.
What if the model has not been independently audited at all?
The memo should state this explicitly rather than remain silent on the point, so the committee can decide whether to proceed, request an audit first, or accept the risk knowingly.
How much detail from the audit report should go into the memo?
A summary only, the overall risk score and any material findings, with a reference to the full audit report as a supporting document rather than reproducing it in full.
Does this template apply to every type of investment decision?
The general structure applies broadly. Project finance and infrastructure deals typically require an additional note on debt sculpting and covenant verification, described on the Project Finance Model Audit pillar page.
Who is responsible for completing the model risk section of the memo?
Typically whoever commissioned or performed the audit, working with the deal team preparing the broader memo, so the two sections are consistent with each other.
Should the memo state who performed the audit?
Yes. The committee should know whether the audit was performed internally, by an external adviser, or by a deterministic audit engine, since this affects how much independent weight to place on the finding.
Related Articles
What Is Model Risk?
Model risk is the risk that a decision is wrong not because the underlying business or investment case was flawed, but because the model used to evaluate it was. It is a distinct category of risk from market risk, credit risk, or operational risk, and it applies to any organisation that relies on a financial model, spreadsheet or otherwise, to support a material decision. Most published model risk content addresses statistical and regulatory capital models used inside banks. This page defines model risk specifically as it applies to Excel based financial models, the kind used every day for investment decisions, lending, and transaction evaluation, which is a related but distinct problem from the quantitative model risk literature most search results return.
What Is a Financial Model Audit?
A financial model audit is an independent, structured examination of an Excel based financial model to confirm that its mechanics, logic, and outputs are reliable enough to support a decision. It is not a check of whether the assumptions are optimistic or conservative. It is a check of whether the model actually calculates what its author believes it calculates. Every year, lenders extend debt, investment committees approve capital, and boards sign off on transactions using numbers that came out of a spreadsheet nobody outside the immediate deal team has independently verified. A financial model audit exists to close that gap before it becomes expensive.