Hong Kong: Financial model audit training course - US Investment Bank

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Investment bankers spend a significant amount of time developing financial models for pitches and transactions, and most international investment banks featured these skills heavily in their progressive career development programs. As less talked about topic is the amount of time spent by investment bankers spend on reviewing third party models, or models developed by colleagues, for commercial accuracy and mechanical integrity.

Jeremy Ooi has recently returned to the Sydney office from Hong Kong where he delivered a tailored training course for an international Investment Bank focused on financial model audit techniques suitable for investment bankers. The course was underpinned by Corality’s internal financial model audit expertise matured over hundreds of transaction model audits.

Developing a structured approach to financial model audit in a banking environment

“Over two days, the course participants developed a structured approach to financial model audit using our internal expertise. Through case studies, exercises and theory sessions, we worked through not just the right timing and process, but also the hands-on techniques available to work efficiently and thoroughly through a model to increase the confidence in financial projections”

Jeremy Ooi, Corality Financial Group

 

When determining the best approach to financial model audit in an in-house capacity, where time constraints are a real limitation, it is essential to have a clear priority of ‘when to do what’. One of the sessions explored this further and discussed in more detailed the different categories of review available, and how to select the most appropriate mix for a specific situation.


Categories of financial model audit techniques 

  • Cell-by-cell review, supported by model audit software
  • Commercial / industry analysis using benchmarks and ratios
  • Summary sheet review for mechanical reasonableness (charting/trends/consistency)
  • Stress testing of assumptions, sensitivities and scenarios + tools (data tables, logs, summary) 

 

How do you best train people in financial model audit techniques?

“It is common to hear people refer to ‘internal peer review’ and ‘internal model audit’ only to find out that what this means is different in every case and is determined by how much time is available before model submissions or decision date. The end results is an inconsistent level of quality assurance which is unacceptable”

Jeremy Ooi

The course stressed the importance of establishing internal communication protocols for which procedures will be performed, and how much time should be dedicated to each of them. Without an in-depth understanding of these concepts there is a great risk of misunderstanding what work has actually been performed to increase the quality of the financial model.

“One amazingly powerful technique for commercial model review is to include sensitivity drivers and a dashboard into a third-party financial model to ensure a commercially sensible impact of key drivers. This is an essential step in ensuring that the right tools are available to the reviewer as a commercial reviews is simply impossible without a summary sheet or dashboard”

The most common question “how do I get my balance sheet to balance?”

One of the most common questions asked in any financial modelling training course is “how do I get my balance sheet to balance”. Jeremy Ooi expands:

“Balancing a Balance Sheet should not a task that’s left to the very end. By using our structured balance sheet development methodology you simply avoid the issue altogether”

What is your best tip to ambitious financial modellers out there?

Jeremy has trained over a thousand financial modellers all over the world, and gets great satisfaction from their improvement over the years.

Establish a reliable process for model development which captures the essential components:

  • SMART financial modelling methodology for flexible, robust and professionally presented models
  • Mastering Excel techniques (shortcuts, functions etc)
  • Subject matter expertise (valuations, project finance, renewable energy, etc)
  • Model audit techniques (to avoid and repair errors in own model as well as third party models)

 Corality’s most popular courses are the Best Practice Project Finance Modelling and Financial Modelling Techniques for Valuations, which are available on the public financial modelling training course schedule as well as in-house corporate delivery.

 

 

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Jeremy is an experienced trainer at Corality Financial Group’s Sydney office. He is an expert financial modeller with strong technical and analytical skills in debt, corporate and project finance modelling. He is also an experienced financial modelling auditor, having audited close to 100 models including those involving some of the largest transactions in Australia and around the world.

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