What is a financial modelling and what does a financial modelling professional do?

Financial modelling professionals build high quality, flexible and bespoke financial models for a business. This allows them to calculate, forecast or estimate financial numbers so that senior management can understand the impact on the business of certain decisions or situations

A financial model is a tool that is built in Excel and contains a set of variable assumptions - inputs, outputs, calculations, and scenarios. It usually includes a set of standard financial forecasts (a profit-and-loss statement, a balance sheet, and a cash flow statement) which are based on those assumptions. If one or more of the inputs are changed, this impacts the calculations and, therefore, the results (outputs).

The main responsibilities of a financial modelling professional include analysing financial information and transactions, performing sensitivity analysis, and preparing and delivering presentations.

Key responsibilities

Responsibilities will vary, but examples include:

  • Designing and developing complex financial models and other tools to use for forecasting and business planning
  • Performing financial analysis and present findings to key stakeholders
  • Performing sensitivity analysis and review sensitivity results from financial models
  • Understanding the results of models and engaging with clients and colleagues about the implications
  • Developing and implementing financial models throughout a project's life cycle
  • Develop template models to allow for quick economic project evaluation where possible
  • Prepare management presentations using financial models to support decision making

Why are they important?

Financial models are used as decision-making tools in businesses. Senior management may use them to estimate the costs and profitability of a proposed new project (for example understanding the likely impact of a new acquisition or expansion into a new territory), or Financial Analysts may use them to anticipate the impact of an economic policy change on a company's stock.

Skills needed for this role

Advanced Excel skills are vital for a financial modelling professional, as well as strong analytical and interpretive abilities. Excellent communication skills are also required in order to present technical and complex findings clearly to key stakeholders.

Strategic Professional Options examinations linked to this role

Advanced Financial Management

Advanced Performance Management

Career opportunities presented by this role

There are a wide variety of career options available in financial modelling - both in-house and within consultancy or accountancy firms - and professionals can work with a range of clients from large corporates to owner-managed businesses. Roles range from more junior-level analysts to senior management positions.

Competencies

High level competencies required include:

  • Advisory and consultancy

    A. Gathers and understands financial and non-financial information to develop complete knowledge of the client business and the environment in which it operates.

    B. Provides expert advice that will add value to the business and gain advantage.

    C. Identify and advise on business partnering to develop strategic relationships to create opportunities, improve performance and solve business problems.

    D. Prepare and present business plans and advise on the actions to implement these plans.

     

  • Corporate and business reporting

    A. Prepares financial statements, corporate financial and integrated reports for external stakeholders using appropriate technology.

    B. Leads effective decision making through analysing, evaluating and communicating performance and position of entities.

    C. Prepares financial statements for groups of entities using appropriate technologies.

    D. Monitors, critically evaluates, and advises on the relevant accounting standards, regulations, conceptual and financial reporting frameworks.
     

  • Data, digital and technology

    A. Identifies strategic options to add value, using data and technology.

    B. Analyses and evaluates data using appropriate technologies and tools.

    C. Applies technologies to visualise data clearly and effectively.

    D. Applies scepticism and ethical judgement to the use of data and data technology.

  • Financial management

    A. Links developments in global trade, markets, business practices and the economic environment to required improvements in the financial and risk management of an organisation.

    B. Advises on business asset valuations, capital projects and investments using appropriate analytical qualitative and quantitative techniques.

    C. Identifies, evaluates and advises on alternative sources of business finance and different ways of raising finance.

    D. Communicates and advises on the impact on financial decision making on current developments in regulation, governance and ethics.

    E. Assesses and advises on appropriate strategies to manage business and organisational performance regarding business and finance risk and effectively communicates the impact.