Following an initial review of a client’s financial model our team often has a conversation on the topic “what do you think of the model?” A discussion on this topic is likely to evolve around structure, formatting, scenarios, flexibility, complexity, level of detail, accuracy, usability, timing, size, number of authors, external links, industry conventions, acronyms, vba macros and a number of other parameters, all equally important in getting an overall understanding of the challenges of a financial model audit of the particular financial model.
To give a reasonably detailed description of a financial model you need around 5-10 minutes to make sure that you cover off the main areas of importance. I had an idea the other day of a way to make these conversations shorter, and arguably more entertaining (or controversial).
Can you describe a financial model as a city?
Most people have a view of the characteristics of different cities in the world even if you have never visited the particular city. I am thinking about the description that you are likely to get if you ask someone “Could you describe XXX in less than one minute?”
Imagine for a minute that your financial model is a city and you try and find the city that best describes that model. There are a number of cities that you definitely don’t want your model described as: (look, I am fully aware that this is based on a superficial stereotype of a city - don’t take it personally if you happen to live there…)
Bad financial modelling cities
Baghdad, Iraq
“What once used to be a magnificent and beautiful financial model is now after years of destructive behavior broken, poorly integrated and with abandoned non-functional section”
New York, USA
“A compact, heavy financial model with a lot of attitude and big bold formulas”
Berlin (before 1989), Germany
“The financial model has been built by two different modellers, with a minimum of interaction and zero integration. One half is has a strong structural integrity and the other half excels in creativity and beautiful formatting”
Dubai, UAE
“A very promising model that didn’t quite get completed because the financial modeler moved on to a better job”
Paris, France
“A financial model full of love and care with formulas like romantic poetry that you could show your girlfriend/wife over a glass of red wine. You enjoy spending day after day finding your way around in the small alleyways and keep finding new treasures and secrets” (Thank you Chris McNeill at PwC Sydney for inspiration)
Stockholm, Sweden
“A minimalist formatted financial model where all cells are of equal importance and no sheet stands out as more important than the others. Beautifully prepared, though it lacks the confidence to recommend the transaction or investment as it is waiting for consensus.”
Sydney, Australia
“On a good day one of the most beautifully constructed financial models in the world but when stressed the infrastructure breaks down and critical functions stop working”
Which city would you like your financial model described as?
This is a lot harder to think of…. Maybe the following ones make sense?
Canberra, Australia
“Oversized infrastructure and sparsely populated makes the financial model ready for growth and it is easily navigated. Working on a ‘no surprises’ approach.”
Kuala Lumpur, Malaysia
“Well structured with strong infrastructure while still maintaining a level of interesting dynamics”
Geneva, Switzerland
“Clean, comfortable and efficient”
Any other ideas?
Jakarta: What would have been
Detroit Originally built in
Boston could be the symbol
What if a spreadsheet was
"Milton Keynes" model A
Perhaps the "Rio de Janeiro"
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