By Chris Surdak
In this article, Chris Surdak speaks from experience and argues that financial models are not used to present scientific or mathematical fact but rather to further the political agenda of a business. But as Big Data takes hold, he asks what will be the future of financial models and the analysts who create them?
Join me for a moment and stand in awe of the mighty, omniscient and all-powerful financial model, determinant of the expenditure of perhaps tens of trillions of euros over the last forty years. Whether constructed in Lotus 1-2-3, crafted in Excel, or exquisitely finessed out of SAP, Oracle or another “Enterprise Resource Planning” package, the financial model is the maker of winners and losers; the judge and jury behind millions of business decisions every year; the creator and destroyer of dreams.
Nearly all business people are familiar with building, evaluating and working with these tools and the use of financial models in business decision-making is almost sacrosanct. This dedication to financial modeling has been based upon a shared belief that these models are the best representation of how businesses perform and what their future performance can and should be. Indeed, many business leaders hold the belief that the numbers generated from financial models are actual facts; things that can be taken as absolute truth and should not be questioned. Truly, woes betide any manager who acts in contravention of a pronunciation emanating from an Excel model, lest they find themselves in search of another job with another organisation!