Access Analytic Reveals How Risk Can Be Built Into The Financial Modeling Process

Perth’s Access Analytic examines why risk, in and of itself, is not necessarily bad, the danger is that risk is not managed well, misunderstood or unintended.

PERTH, AUSTRALIA, February 26, 2014, Financial Risk is an inevitable part of every business, and this is why it makes sense to utilize effective modeling to quantify and manage business risks. Access Analytic uses builds Financial Models that are used for budgeting and forecasting, as well as capital raising and financing.

Jeff Robson, Access Analytic’s CEO, explains that areas of risk can include: reserves of a resource, sales prices, production levels, project life or product lifecycle, exchange rates, processing or manufacturing and costs, and costs of marketing and distribution. There are three financial modeling methods for dealing with these risks, and they are:

1. Sensitivity Analysis: What is the impact on a key output when you change one of the inputs?

2. Scenario Analysis: What is the impact on a group of outputs when different sets of inputs are applied?

3. Monte Carlo Analysis: What is the likely range of values a key output will take when you take into account the different amounts of uncertainty associated with key inputs?

Sensitivity Analysis:

This is analysis of a model under a potential range of different scenarios. It typically focuses on one input and measures one output, incorporating ‘what-if’ and break-even analyses to determine what

impact a variable has on the result. Sensitivity analysis allows for uncertainty.It helps determine the key drivers, explores what happens if we’re wrong on one or more assumptions and determines a range of likely values.Typically, outputs are displayed in ‘spider’ charts or tables.

Scenario Analysis:

Where sensitivity analysis examines one model output under a variety of different sets of inputs, scenario examines multiple outputs and multiple inputs. Scenario analysis examines: What are the key outputs in different scenarios? How are the key outputs affected by changes in the inputs? Outputs typically take the form of tornado charts, waterfall charts or tables.


Monte Carlo Analysis:

Monte Carlo analysis is a method of simulating sources of uncertainty that affect inputs, and calculating the likely output range. Monte Carlo analysis: Takes into account different amounts of variation in the inputs to determine what is the likely range of the key output. It uses multiple sources of uncertainty and estimates the range of numbers expected, but not the exact number.

About Access Analytic: 

Established in 2000 (originally under the name “Mailbarrow”), Access Analytic is a leading provider of Business Analyst tools and services. They provide modeling, reporting and analysis for medium and large companies to enable them to improve their financial and operational performance. They are based in Perth, Western Australia and provide their services to companies so they can improve their performance.

For complete information, please visit: Access Analytic

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