Asset Management and Financial Operations with Simulation Modeling
Uncertain data values or dependencies are inevitable factors when you are carrying out long term financial planning. It’s often the case that the uncertainty factor is simply ignored, or relegated to footnotes or a discussion of assumptions, and decisions are made on the basis of deterministic models, which assume that all factors affecting the economical situation are either precisely known or fall within discrete ranges. Some of these values are merely “unknowns” and the best guess, group consensus, or most recent data is used as a proxy. But sometimes key variables are not included or assumed away in the analysis; perhaps important interactions between two otherwise minor factors can become the major cost driver? These are the “unknown unknowns” and their impact cannot be simply resolved by Monte Carlo combinations of the possible values of the key variables tested in a spreadsheet simply because the analysts’ mental model did not conceive of their importance. The laws of probability, not to mention experience, tell us that many of these deterministic models will lead to significant financial losses.
Our consulting partners use simulation modeling in these situations to cover the range of probabilistic results, to uncover hidden interactions in multiple scenarios, to test dependencies and sensitivities; in short, to inform thinking rather than just to quantify our perception of the analysis. AnyLogic models allow you to uncover uncertainty and develop the “most likely” solution while still keeping an eye on, and developing mitigation strategies for, probabilistic risks and potential negative scenarios.
Via Simulation Modeling our partners offer the following services in the field of asset management and financial operations: