Financial Modelling

Emma Burrows
Mind Map by Emma Burrows, updated more than 1 year ago
Emma Burrows
Created by Emma Burrows over 5 years ago
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Information Management

Resource summary

Financial Modelling
1 Feasibility
1.1 Benefits
1.1.1 Clarify modelobjectives
1.1.1.1 Identify boundaries- what it will and will not do
1.1.1.1.1 Estimate time and resources
1.1.1.1.1.1 understand main risks
1.1.1.1.1.1.1 broad data requirements
1.1.1.1.1.1.1.1 confirm whether model should be built
1.2 Problems Avoided
1.2.1 Expectations differ
1.2.1.1 model is rushed
1.2.1.1.1 model does not mitigate risks
1.2.1.1.1.1 solution is suboptimal
1.2.1.1.1.1.1 model gets abandoned
1.3 Should include
1.3.1 Purpose and objectives
1.3.1.1 users of the model
1.3.1.1.1 initail thoughts on how the model will work
1.3.1.1.1.1 level of risk
1.3.1.1.1.1.1 time and resources needed
1.3.1.1.1.1.1.1 signed agreement
1.3.1.1.1.1.1.2 Payback period
2 Analyse
2.1 Benefits
2.1.1 Ensures Model Solves correct problem
2.1.1.1 Forces developer and sponsor to think through problem
2.1.1.1.1 common understanding
2.1.1.1.1.1 makes testing easier and effective
2.1.1.1.1.1.1 new undertanding of problem and more valuable outcome
2.2 Problems Avoided
2.2.1 Building takes much longer
2.2.1.1 frequent chnges introduce errors
2.2.1.1.1 design may be haphazard
2.2.1.1.1.1 other stages take longer
2.2.1.1.1.1.1 model is discarded
2.3 Occam's Razor
2.4 Define Model Relationships and Reports
2.4.1 Bubble Diagrams
2.4.1.1 Non descriptive
2.4.2 Who will use reports
2.4.3 Calculation Tables
2.4.3.1 Useful
2.4.3.2 Descriptive
2.4.3.3 Take a long time to make
3 Design
3.1 Benefits
3.1.1 Built in Correct software
3.1.1.1 Calculations are easy to understand
3.1.1.1.1 Appearance is usser friendly and professional
3.2 Problems Avoided
3.2.1 Difficult to use
3.2.1.1 Difficult to navigate
3.2.1.1.1 Difficult to develop or amend
3.2.1.1.1.1 Likey to contain errors
3.2.1.1.1.1.1 Hard to test
3.3 Choosing the Software
3.3.1 Spreadsheets
3.3.1.1 lots of numerical manipulation
3.3.1.1.1 user interface
3.3.1.1.1.1 copmplex report structures
3.3.2 databases
3.3.2.1 data validation
3.3.2.1.1 lots of data little calculation
3.4 Golden Rules of Design
3.4.1 One formula per row (column)
3.4.1.1 Refer to left and above
3.4.1.1.1 Use multiple worksheets appropirately
3.4.1.1.1.1 Separate inputs, calculations, results
3.4.1.1.1.1.1 Consistent use of columns
3.4.1.1.1.1.1.1 Include documentation sheet
4 Maintain
4.1 Model Must stand alone
4.1.1 Developer may change jobs
4.1.1.1 Model is not misused
4.2 Back Up procedures
4.2.1 Copy saved off site
4.3 Control Change
4.3.1 Change request forms
4.3.1.1 Only one person makes changes
4.3.1.1.1 Version number naming rules
5 Implement
5.1 User manuals and training
5.1.1 Communicates how to use model
5.2 Sensitivity analaysis
5.2.1 Fluctuations in inputs affect outputs
5.2.1.1 Monte Carlo 95% degree of certainty
5.2.1.1.1 Include Exec. summary
5.2.1.1.1.1 Recommendations and next steps
5.3 Scenarios
5.3.1 Different Stories
5.3.1.1 Possible Inputs
5.3.1.2 Run trees
5.3.1.2.1 Branches of changs with a summary report
5.3.1.3 Comparator
5.3.1.3.1 Run A, Run B, Run A-Run B
6 Test
6.1 Analysis
6.1.1 Review Model reports
6.1.1.1 Review calculation Tables
6.1.1.1.1 Examine data inputs
6.2 Unique Formulae
6.2.1 Identify Unique Formulae
6.2.1.1 Check unique formulae analysis
6.2.1.1.1 Check referencing
6.3 Numeric
6.3.1 Check results to analysis example
6.3.1.1 Idenpendently calculate results for seecond time
6.3.1.1.1 Reconcile against exsisting report
6.4 Robustness
6.4.1 Perform boundary test with sensible inputs
6.4.1.1 Check zero, negative and large inputs
6.5 Macro
6.5.1 check macro buttons and hyperlinks
6.5.1.1 try to brak macros with reasonable tests
6.5.1.1.1 macros have error traps?

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