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Duration: 3 days
Course overview
In the current economic environment, understanding and managing risk and
opportunities are, more than ever, essential to companies' future survival and
prosperity. In this course, we will teach how risk analysis can be used to
quantitatively assess the uncertainty surrounding financial decisions (new
projects, acquisitions, etc). We will show how to identify and analyze key
uncertainty drivers, which forms the basis for efficient risk and opportunity
management strategies.
The course familiarizes you with risk analysis modeling environments (in this
case Crystal Ball with Excel or @RISK with Excel, but the lessons apply equally
well to other modeling environments). The course provides an in-depth knowledge
of the modeling techniques necessary for professional level risk assessments in
corporate finance. The course covers assessment of uncertainty, time-series
forecasting, eliciting and modeling expert estimates, and using risk analysis
results. We will look critically at risk analysis models and will identify the
most common mistakes made in risk modeling. You are encouraged to bring along
risk modeling problems they are currently facing.
We will also discuss how the usual practices in calculating an NPV for a capital
investment and argue that it does not correspond to the appropriate theory and
will frequently under-value an investment opportunity. We will demonstrate more
insightful methods, together with how to evaluate the real options flexibility
inherent in any investment - techniques that can only be achieved through Monte
Carlo simulation.
The course content will enable you to produce realistic, high quality corporate
finance risk analysis models. We designed the course to encourage you to develop
creative problem solving skills to ensure that the risks being addressed are
modeled accurately, efficiently and in a manner that provides decision makers
with the clearest and most helpful input.
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Course objective
The course will give you the ability to conduct, present and
critique financial risk analysis that uses the latest methods. Concepts and
topics covered in this course include the fundamentals of model building,
probability theory, Monte Carlo simulation (using Crystal Ball or @RISK), using
expert opinion, times-series modeling, including risk in NPV analysis and real
option analysis.
The course balances basic principles of financial risk analysis with
a more applied and in-depth knowledge of the modeling methods and techniques-
all aimed to help you understand rather than "learn", corporate finance risk
analysis.
See the section on
course content for a detailed description of the course
and the specific topics covered.
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Training material
We will provide lecture notes both in hardcopy and on CD. This CD
also contains all model files produced for the course. Any extra models
developed during the course are downloadable from a private course website.
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Course format
The course runs from 9:00 am to 5:00 pm each day. Morning and afternoon coffee,
and lunch are provided. Optional evening workshops on the first and second days
allow extra time for running through example models and exercises.
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Who should attend
The course covers the basics of financial risk modeling, and is ideally suited
to corporate finance professionals, M&A analysts, risk managers, management
consultants, and corporate strategy planners. Financial risk analysis tools can
be applied in a very wide range of industries (from venture capital to the
pharmaceutical industry, oil and gas, banking and retail) and to numerous
capabilities such as new product and business development, corporate finance,
strategy, marketing and mergers and acquisitions.
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Prerequisites
All models are developed using Excel and Crystal Ball or @RISK. It is essential
that all participants are reasonably proficient in Excel (see
prerequisites). Both courses are very intensive. So to save time,
for @RISK users it is important to make themselves familiar with the basic
principles of @RISK by going through the
on-line tutorial. Crystal Ball users can take the Crystal ball
on-line tutorial that is available
here.
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Laptops
Participants are required to bring laptops loaded with Microsoft Word, Microsoft
PowerPoint and Microsoft Excel and Decisioneering's Crystal Ball 7 or Palisade's
@RISK 4.5 Professional installed, and with a CD drive. Trial copies of Crystal
Ball and @RISK are available free of charge from
Decisioneering and
Palisade web-sites but these should not be installed too early as
trial versions run out after 7 days for Crystal Ball and 10 days for @RISK. We
can arrange copies of @RISK at a 20% discount should you wish to purchase.
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ModelAssist
ModelAssist from
Vose Consulting is a comprehensive risk analysis training and reference software
tool. ModelAssist provides an in-depth explanation of all of the risk analysis
concepts, techniques and methods introduced in this course and greatly
complements the course material. It is particularly helpful as a reference for
participants of the material that has been presented during the course.
ModelAssist will be available to participants at a reduced price.
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Teaching philosophy
All of Vose Consulting's courses aim to help the participants understand (rather
than 'learn') risk analysis, which can only be achieved through a relaxed,
informal and interactive environment, through plenty of examples and hands-on
exercises where students apply and adapt what they have learned. We believe
that:
"When you hear something, you forget it.
When you see something, you remember it.
But not until you do something will you understand it"
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Course content
Day 1
- Introduction to Crystal Ball/Excel or @RISK/Excel and risk modelling
- Introduction to probability theory and statistics
- Building models and using the results - some simple finance examples
- Presenting risk analysis results, sensitivity analysis, stress analysis, goal
seek
- Evening workshop: models and exercises
Day 2
- Using data to determine probability distributions
- Using expert opinions to determine distributions
- Using Central Limit Theorem
- An insurance problem
- Portfolio optimisation problem
- More involved finance problems
- Evening workshop: models and exercises
Day 3
- Modelling correlation
- The most common modelling errors
- Time series modelling and forecasting
- Using simulation with discounted cashflow models
- Real option evaluation
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©Copyright 1997-2010 Vose Consulting. All Rights Reserved.
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