FINANCIAL MODELLING AND RISK ANALYSIS

SHE Level 3
SCQF Credit Points 20.00
ECTS Credit Points 10.00
Module Code M3N325678
Module Leader Chioma Nwafor
School Glasgow School for Business and Society
Subject Finance and Accounting
Trimester
  • B (January start)

Pre-Requisite Knowledge

Fundamental of Corporate Finance or an Equivalent Introductory Course in Financial Management

Summary of Content

In a changing global environment, businesses must be able to make decisions about future risks and opportunities despite uncertainty. As technological advancements continue to disrupt the world-of-work, firms will need to adapt, so they can remain competitive while preparing for an uncertain future. Financial Modelling and Corporate Finance (FMCF) module equips students with the relevant skill-sets to meet the demands of the 21st-century work environment. The module exposes students to the A, B, C, of financial modelling and planning using Excel and @Risk software. Students are introduced to the development and implementation of financial models for the purposes of financial planning and decision making. The course presents a comprehensive approach for designing simple to sophisticated financial models in almost all the major areas in corporate finance and accounting using Spreadsheet. The @Risk software is used to introduce uncertainty in these models. The module aims to develop student's knowledge and understanding of both the theories and practical applications of corporate financial modelling and management. Students will be exposed to the development of a variety of financial models including Pro-Forma Income Statement and Balance Sheet, DuPont Analysis, Cash-Flow Modelling, Modelling Risk and Uncertainty as well as Time Series Forecasting, amongst others. These models will be used to address real-world financial planning problems.

Syllabus

Syllabus -360 Introduction to Excel and @Risk Applications; Data Handling in Excel including: Data Tab, VLOOKUP, PIVOT Table, Charts, and Formulas; Understanding Probability and Probability Distributions; Overview of Financial Planning and Modelling; Describing Risk with Probability Distributions; Financial Ratio Analysis, Common Size Financial statements, DuPont Analysis, Break-Even Analysis; Modelling Risk and Uncertainty Using Monte Carlo Simulation Projecting Pro-Forma Financial Statements Cash Flow Analysis and Capital Budgeting Risk Analysis; Introduction to Regression Analysis; Time Series Forecasting and Analysis, etc. Contemporary Issues in Financial Modelling

Learning Outcomes

On successful completion of this module, students should be able to• Demonstrate working knowledge of data handling in Excel, and @Risk software and how to use them to build a variety of financial models. • Describe the basic methods for dealing with risks and uncertainty including sensitivity analysis; scenario analysis and as well as Monte Carlo simulations. • Learn how to model probability distribution of returns, report risk on the basis of those probabilities and produce simple risk model. • Have a practical understanding of the financial theory underlying those models; • Use the models and theory to address a variety of financial planning problems; • Communicate their finding in a clear and concise manner.

Teaching / Learning Strategy

The learning and teaching strategy uses a blended approach of lectures, labs and directed learning supported by GCU Learn. Lectures will provide the principal mechanism by which key themes are presented; lab sessions provide the medium for teamwork and provide an opportunity for students to explore the lecture themes in more detail as well as providing opportunity for hands-on demonstrations of key lecture themes. The directed learning will be structured around class room lectures and will focus on a range of topics related to the course syllabus. Lectures, and labs will be facilitated by the module leader and tutors. In addition, one-to-one tutorials are available via scheduled face-to-face meetings. One of the major components of this module is the application of theoretical concepts in solving real-world problems. To this end, case studies will play an important part in this module. A significant percentage of lab sessions will be devoted to discussion of the assigned cases. Many of the assigned cases are somewhat open-ended in that there is not just a single correct solution. Students are expected to work in groups and each group is expected to present and hand in the assigned cases. Students should also be able to communicate their findings clearly and concisely. Every student will receive a comprehensive study guide in the form of a module handbook. Feedback strategy - aims Students will be provided with feedback within three weeks of submission. The feedback that they receive is designed to: -360 Facilitate the development of self-assessment; Encourage dialogue; Clarify good performance; Provide opportunities to close the gap between current and desired performance; Deliver high quality information about individual learning; Encourage positive motivational beliefs and self-esteem; Provide information to teachers that can be used to help shape the teaching. In order to achieve these aims, the following strategies will be adopted by this module: A: Facilitating the development of self-assessment: The assessment requirements will be discussed in the introduction to the module. Students will be asked to reflect on the standard of their work. B: Encouraging dialogue: Students are encouraged to discuss their comments with lecturers, arrange meetings with academic advisors to review performance. C: Clarifying good performance: Students will be provided with information about marking criteria. They will also be provided with examples of assessments to review in order to identify and clarify good performance (as per A). D: Providing opportunities to close the gap between current and desired performance: Students may find it helpful to identify actions points based on the feedback they have received. E: Delivering high quality information about individual learning: Feedback will be provided within 3 weeks of submission, covering strengths, weaknesses and corrective advice. F: Encouraging positive motivational beliefs and self-esteem: Feedback will be designed to encourage and be constructive. G: Providing information to teachers that can be used to help shape the teaching: Students, if they wish, may identify where they are having difficulties when they hand in their assignments.

Indicative Reading

Core Textbook 1. Morris, J., R., and Daley, P., J., (2017): Introduction to Financial Models for Management and Planning . CRC Press Taylor & Francis Group. Indicative Readings 2. Tony Blunden and John Thirlwell (2013): Mastering Operational Risk: A Practical Guide to Understanding Operational Risk and How to Manage It , Second Edition 3. Readings for the Financial Risk Manager Volume 1 and 2 Global Association of Risk Professionals (GARP), 4. Woods, M. (2011) Risk Management in Organisations: An integrated case study approach , Routledge Journals: -359 Journal of Commercial Lending -359 The Journal of Portfolio Management -359 Journal of Risk and Uncertainty Journal of Financial Risk Management Journal of Finance Journal of Forecasting, Journal of Banking and Finance

Transferrable Skills

Transferrable Skills This module will develop the following skills in a manner that encourages independent initiative and critical thinking: -360 Personal and interpersonal skills Oral and written communication skills Data gathering, analysis and interpretation Use of Excel and @Risk for data analysis Use of quantitative methods, problem solving and critical thinking. As a part of the broader transferable skills students will be able to demonstrate: 1. Advanced knowledge in the subject area. 2. Use computers as a learning tool to explore models, ideas and for problem solving.

Module Structure

Activity Total Hours
Lectures (FT) 24.00
Assessment (FT) 41.00
Independent Learning (FT) 123.00
Practicals (FT) 12.00

Assessment Methods

Component Duration Weighting Threshold Description
Course Work 02 1.00 40.00 35% MCQs that will be taken in week 12
Course Work 01 n/a 60.00 35% Group coursework