Last week I had the pleasure of presenting a webinar through CPA Australia. I enjoyed spending an hour bringing a thousand participants up to speed with the Best Practice Standards for Financial Modelling in Excel as part of CPA’s Business and Economic Insights Webinar Series.
The session covered a variety of interesting areas ranging from identifying Model Risk in your own organisation to recommendations on how to prevent risk and actions you can take once you are presented with Model Risk.
Whilst there is no magic pill for the problem, Model Risk can be significantly mitigated through the following actions:
- Identify a Model Risk champion in your organisation and give them time and budget to actively manage Model Risk
- Identify an established financial methodology, such as Corality’s best practice financial modelling methodology, SMART and stick to it
- Ensure users of financial models who are providing decision makers with information are sufficiently trained
- Actively scoping a new financial model, rather than just starting a new Excel spreadsheet
- Pay a lot of attention to testing a financial model (planning and prioritisation)
The Webinar was very interactive with real time Q&A. Webinar technology allowed me to poll the audience at relevant times to establish participant’s views and their own professional experiences.
When I asked: Do you influence or provide information to somebody that makes business critical decisions using a spreadsheet based framework? 75% if the people that voted said yes. I then went on to explain the concept of Model Risk and how it manifests itself in organisations.
Additional polls clearly indicated that everybody got the most out of my Best Practice for Financial Modelling in Excel webinar. That meant, to my relief, that what I have been formalising and communicating for my entire career was somewhat validated.