(Words from a famous song by Pink Floyd)
In this case though, both the brick and the wall are metaphorical.
The brick is knowledge and the wall is a dam wall – a dam of knowledge.
A place where we discover, then uncover, then store important information applicable to life or our health or our chosen activity or our professions.
Some time ago I wrote an article about the Dunning-Kruger effect.
The Dunning-Kruger effect is a type of cognitive bias in which people believe that they are smarter and more capable than they really are.
In this day and age there is really no need for pretense or ignorance, because access to knowledge today is hardly a challenge. All it requires is a desire to learn and a little energy.
And even if we don’t know where to look, we can get ChatGPT to do the heavy lifting – the research for us – and then build out on that base.
And the wonderful thing about knowledge is that there is always more to explore, to learn.
Of course we all know the caveat about learning and more about less and less until we know everything about nothing!
By now, if you have ever read any of my articles, you will know one thing.
I am a deducted follower of fashion – as the song goes- and my “fashion” is financial modelling.
At the request of an international client, I recently developed a new course – advanced financial modelling for strategic decision making.
As you can imagine, it took a lot of effort, a lot of considered thought – what to include- how deep to dive, then researching each topic – adding to my own knowledge and finally creating excel files to demonstrate the topic and test delegate uptake.
Creating the course was both demanding and enlightening – especially those topics where there are a variety of approaches and solutions – like valuations or even more difficult where the model relates to something – a product or service – which has never previously existed – a new creation or invention. A total absence of historical data or information!
After some considered thought, I chose the following topics for the course:
a. A review of current best practice modelling methodology
b. Advanced modelling techniques, including macros, optimisation models, probabilities and Monte Carlo simulations
c. Forecasting Techniques including time series analysis, moving averages and regression analysis
d. An in-depth look at valuation methodology and the alternative approaches beginning with standard DCF valuations, to a review of Gordons Growth Model and its shortcomings, alternative methods of calculating terminal values, choosing a discount rate and finally LBO valuations
e. An exploration of capital budgeting – rationale and alternative methods
Creating the course was both demanding and enlightening – especially those topics where there are a variety of approaches and solutions – like valuations or even more difficult where the model relates to
something – a product or service – which has never previously existed – a new creation or invention. A total absence of historical data or information!
After some considered thought, I chose the following topics for the course:
a. A review of current best practice modelling methodology
b. Advanced modelling techniques, including macros, optimisation models, probabilities and Monte Carlo simulations
c. Forecasting Techniques including time series analysis, moving averages and regression analysis
d. An in-depth look at valuation methodology and the alternative approaches beginning with standard DCF
valuations, to a review of Gordons Growth Model and its shortcomings, alternative methods of calculating terminal values, choosing a discount rate and finally LBO valuations
e. An exploration of capital budgeting – rationale and alternative methods
f. Risk Management with specific focus on Financial Risk management and financial ratios
g. Complex models and models without any history (previously nonexistent products or services)
h. The impact of AI on financial modelling in the future including tools such as Openbox and Modano
Having completed the process and while reviewing the completed product, I wondered if ChatGPT – th filter of all knowledge- would agree with my choices.
So, I asked it – being careful to frame my question.
My question was …
“write the content for an article entitled “advanced financial modelling for strategic decision making” detailing all the relevant issues and topics to be included to give a comprehensive overview of each topic”
ChatGPT
Here is a brief summary of its responses.
Advanced Financial Modelling for Strategic Decision Making – Introduction
Financial modelling plays a pivotal role in the business landscape, providing decision-makers with
invaluable insights and a clear pathway for strategic development.
f. Risk Management with specific focus on Financial Risk management and financial ratios
g. Complex models and models without any history (previously nonexistent products or services)
h. The impact of AI on financial modelling in the future including tools such as Openbox and Modano
Having completed the process and while reviewing the completed product, I wondered if ChatGPT – the filter of all knowledge- would agree with my choices.
So, I asked it – being careful to frame my question.
My question was …
“write the content for an article entitled “advanced financial modelling for strategic decision making” detailing all the relevant issues and topics to be included to give a comprehensive overview of each topic”
ChatGPT
Here is a brief summary of its responses.
Advanced Financial Modelling for Strategic Decision Making – Introduction
Financial modelling plays a pivotal role in the business landscape, providing decision-makers with invaluable insights and a clear pathway for strategic development.
Advanced financial modelling goes a step further, employing intricate methodologies and considerations to deliver nuanced and comprehensive perspectives.
This article will detail the various issues and topics underpinning advanced financial modelling to bolster strategic decision-making.
Cutting to the chase, I felt quite vindicated as ChatGPT listed 7 of the same topics as I had selected.
The ones I missed were:
1. Behavioral consideration when building models
2. Ethical Considerations in Financial Modelling, and
3. Conclusion: Ensuring Robust Strategic Decision Making
-
Aligning financial models with business strategy
-
The iterative nature of modelling and decision-making
-
The importance of continuous learning and model evolution
-
Embracing uncertainties and leveraging them for strategic advantage
Incorporating advanced financial modelling into strategic decision-making equips businesses with a robust toolkit to navigate the intricate and volatile corporate landscape.
From leveraging machine learning for predictive insights to understanding and mitigating biases in forecasting, advanced financial modelling stands as a beacon for sound, well-informed, and strategic decisions.
As the business environment continues to evolve, so too will the methodologies and tools at our disposal, emphasizing the importance of staying abreast with the latest advancements in this domain.
All in all, a stimulating and thought-provoking exercise. And hopefully a stimulating and beneficial course!
If you want to expand your knowledge and extend your capacity to build more complex models, or attend our course, send me an email or call me on + 27 82 888 1900.
Colin Human CA(SA)
CEO
Goalfix Financial Modellers
