The financial modelling world has never been one for standing still. Whether it’s embracing new methodologies or keeping pace with the rapid development of modelling software, part of being a successful modeller has always been about keeping one eye on what’s coming next.
But staying one step ahead of the future isn’t easy. That’s why, in this three-part series, we’re speaking to modelling standards experts Richard Wärnerlid, Andrew Berkley, and David Lyford-Smith to get their views on what the future holds for financial modelling standards.
Will there be a global standard?
That’s the big question. As standards like FAST, Mazars SMART, and the ICAEW financial modelling code seek to bring greater consistency to financial models, is it only natural that they’ll one day converge into a single universal standard?
At the moment, that doesn’t look likely. For starters, the reason there’s such a variance in standards now is that it’s nearly impossible to design one system that works for every modeller in every situation.
For Andrew, though, what’s more, important than striving for a universal standard is the universal adoption of standards in general. He says that too many models are built according to the modeller’s own personal preferences, without considering who’s going to be looking at the end result. “If the future changes so that people say, ‘I have to refer to something before I start,’ then that will be a better future,” he says.
The tech may change, but the principles stay the same.
Technology has always been part and parcel of financial modelling, and new developments will always drive change. Excel has introduced several powerful features in recent years — LAMBDA and LET bring a new way of defining values and functions, while Dynamic Arrays allow a single formula to calculate values for multiple cells. For a lot of people, they herald a fundamental change to the way we approach and build financial models.
But Rickard says modellers shouldn’t let new functionality distract them from what models will always need to be: simple and accessible. Models need to be shared with others, he says, and that means new functions like LAMBDA and Dynamic Arrays need to be adopted and understood by enough people before they can be folded into current modelling standards.
Mainstream adoption won’t happen overnight. “It takes a very long time for anything new to become universal,” David says. “I’m only now getting to the point where I don’t see people using Excel 2007 or 2003 anymore.”
But when it does happen, there’s no reason these new functions won’t be incorporated into the practices of the future as another way of delivering powerful, robust analysis.
The best foundation for the future.
Whether the adoption happens fast or slow, it will happen eventually, and modelling methods will change with it. Good standards are designed to adapt to new platforms and functions, and that’s what drives financial modelling forward.
The same is true of modellers themselves. That’s why future-proofing your skillset is at the heart of the Full Stack Modeller mission. Our training is as ever-evolving as the industry itself.