I get tired of explaining to my 6 and 3 year old daughters that it is good to share.
OK, so there is only one teddy and 2 of you, but can’t you just play with it nicely together?
Do we really need to buy 2 teddies?
How many different financial models are there in the world? I have no idea, but a lot.
Can they really all be doing something wildly different and unique? Do they not have common structures and code which can be re-used? Can’t we all just share?
I have for the last 10 years been looking at models in the UK PFI sector and I can say for a fact that I have been looking at around 1,000 versions of pretty much the same model, prepared at huge expense by different organisations, some good, some less than good. And that is just one sector in one country.
‘But the model is our intellectual property… it gives us competitive advantage.’
Deals are rarely won or lost on the quality of the financial model, so long as the model is right and ready in time. It has been known for deals to be won on the strength of an incorrect financial model under pricing, but that can’t be a good thing right?
The model should be a means to an end which accurately reflects the commercial desires of an organisation. The art is not in the model, but in the use of the model.
How much more efficient could we be as a world economy if we could collaborate more, if we could stop building 1,000 models that do exactly the same thing? I don’t know, but a lot.
Weighing the pros and cons of this is a complex issue. I’d love to hear your thoughts on model sharing and how you have made it work.
Comments
Dear Danny,
In the years spent at EY as a Financial Modeler, I too have seen a few occurrences of unique models created for several projects in which a model could have been recycled to achieve the desired result. On the other side of the spectrum, I also had the ‘great’ opportunity to review a template model. Template models are unnecessary complex and increases the workload for model reviewing.
In my opinion, the standards of modeling in the working sheets should be adhered too. However, output sheets, especially the dashboard sheets, should be unique based on the customer’s priority. Priorities could differ from the ability to run scenarios to the presentation for financial outputs.
In summary, I would avoid the desire to construct a template (one for all) model, and instead ensure standards in working sheets. Models should be designed in a manner that is easy for reviewers to approve.
Best Regards,
Ali Abdulhussain