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About us – Strategy @ Risk

Strategy @ Risk

Category: About us

We’ve Got Mail! (2)

This entry is part 2 of 2 in the series Self-applause

From:

Congrats – you are in the Top 25% of Most-View ed on SlideShare:

Even if we did not post anything new on SlideShare in 2014, our contribution ended up in the upper quartile of the most viewed articles on SlideShare. We believe that this shows the great current interest in uncertainty and risk related to economic issues.

The article The Weighted Average Cost of Capital was originally published in the January/February 2003 issue of Financial Engineering News, and was many years later reprinted as (among) “The best of Financial Engineering News”:

And it is still a relevant and popular article both on SlideShare and here. Since we put up our home page in 2009 the number of visitors and page loads has increased steadily:

At the end of 2014, almost 80.000 had visited our home page, and read one or more of the articles posted there. The increase in visitors and articles read again shows the increased interest in uncertainty, risk and Monte Carlo simulation – topics we at the best of our ability try to cover.

Thanks
S@R

28/02/2015
What we do; Predictive and Prescriptive Analytics

This entry is part 1 of 3 in the series What We Do

Analytics is the discovery and communication of meaningful patterns in data. It is especially valuable in areas rich with recorded information – as in all economic activities. Analytics relies on the simultaneous application of statistical methods, simulation modeling and operations research to quantify performance.

Prescriptive analytics goes beyond descriptive, diagnostic and predictive analytics; by being able to recommend specific courses of action and show the likely outcome of each decision.

Predictive analytics will tell what probably will happen, but will leave it up to the client to figure out what to do with it.

Prescriptive analytics will also tell what probably will happen, but in addition: when it probably will happen and why it likely will happen, thus how to take advantage of this predictive future. Since there are always more than one course of action prescriptive analytics have to include: predicted consequences of actions, assessment of the value of the consequences and suggestions of the actions giving highest equity value for the company.

By employing simulation modeling (Monte Carlo methods) we can give answers – by probability statements – to the critical question at the top of the value staircase.

This feature is a basic element of the S@R balance simulation model, where the Monte Carlo simulation can be stopped at any point on the probability distribution for company value (i.e. very high or very low value of company) giving full set of reports: P&L and balance sheet etc. – enabling a full postmortem analysis: what it was that happened and why it did happen.

Different courses of actions to repeat or avoid the result with high probability can then be researched and assessed. The EBITDA client specific model will capture relationships among many factors to allow simultaneous assessment of risk or potential associated with a particular set of conditions, guiding decision making for candidate transactions. Even the language we use to write the models are specially developed for making decision support systems.

Our methods will as well include data and information visualization to clearly and effectively communicate both information and acquired knowledge – to reinforce comprehension and cognition.

Firms may thus fruitfully apply analytics to business data, to describe, predict, and improve its business performance.

01/01/2008
How we work

An initial meeting allows us to begin to understand each other and for us to gain an insight into a client’s business, ideas, ambitions and direction through an open but totally confidential exchange. Following one or possibly two further meetings and subject to client approval we prepare and submit a fully costed proposal of work, with time lines and key deliverables made clear. (See: S@R Services) .

Formal acceptance of our proposal of work – its scope, scale, fees and costs, and timing initiates the program that will almost certainly require input and co- operation of key executives and managers at regular intervals during its life-cycle. All information, data and analysis will be handled according to relevant security standards.

Depending upon the nature of the program, we usually take a phased approach enabling joint assessment at the end of each stage of work.

On completion of an assignment we will deliver a comprehensive presentation and understandable report making clear our key recommendations and next steps to be pursued. We will not leave you at risk.

If you are interested in S@R services, please do not hesitate contacting us to discuss how we can provide a solution satisfying your demands.

01/01/2008
How to take advantage of Strategy@Risks services
The purpose of the modelling is to as thoroughly as possible describe the company’s present economic and financial situation, and its state throughout the forecast period.

The S@R financial simulation model can simulate the uncertainty and risk in various tax regimes, economic and fiscal write off. Calculate tax; incorporate depreciation rules to calculate deferred tax, any tax benefits related to forward carry losses. Forecast results from different financial strategies, strategies for dividends and repurchase of shares etc. Working with multiple currencies, currency risk and translation risk (hedge), for global clients.

The reports produced from the Strategy@Risk starts from a complete set of information collected from the internal accounts, financial accounts, or from a company specific model.

Strategy@Risk provides a full account of the calculations and results. We can modify the reports to the specific problem at hand, so that the relevant parameters are isolated and explained in the best manner. To further expose the problems at hand, we make extensive use of professional graphic illustrations.

Here is a selection of our reports – based on the most likely value of the input variables – that is useful to illustrate relevant conditions. In addition probability distributions for all the variables will be calculated and those pertinent to the strategy will be graphed.
- Profit and loss account and balance
- Debt and equity calculations
- Foreign exchange effects
- Translation and translation hedge effects
- Production, sales and inventory
- Gross margin analysis
- Working capital
- EBIT, NOPLAT, Free cash flow
- Cost and value of debt and equity
- Economic Profit/EVA/Residual income/Super Profit
- Cash flow to investor and internal proceeds
- Fri cash flow value
- Economic profit value
- Adjusted present value
- Key figures
- VAT and investment tax
- Depreciations
- Tax deferred and payable
- Cash flow analysis
- Financing analysis
- Year-end dispositions
- Expected remaining life-time on investments
- Value drivers
- Assumptions and parameter values, etc.
01/01/2008
Who we are
Strategy@Risk is operated by partners with long experience as CFO, CEO and board members in a range of businesses. As former university employees we can draw on academia when a project demands state of the art knowledge in a field.

Strategy@Risk takes advantage of a program language developed and used for financial risk simulation. We have used the program language for over 25years, and developed a series of simulation models for industry, banks and financial institutions.

The language has as one of its strengths, to be able to solve implicit equations in multiple dimensions. For the specific problems we seek to solve, this is a necessity that provides the necessary degrees of freedom to formulate the approach to problems.

The Strategy@Risk tool has highly advance properties:
- Using models written in dedicated financial simulation language (with code and data separated; see The risk of spreadsheet errors).
- State of the art in financial- and international trade theory.
- Double-entry bookkeeping, using accounts balancing as tool for solving simultaneous equations generating P&L and Balance Sheet.
- Solving implicit systems of equations giving unique WACC calculated for every period ensuring that “Free Cash Flow” always equals “Economic Profit” value.
- Programs and models in “windows end-user” style.
- Extended test for consistency in input, calculations and results.
- Transparent reporting of assumptions and results.
In the Strategy@Risk framework all items, whether from the profit and loss account or from the balance sheet, will have individual probability distributions. These distributions are generated by the combination of distributions from factors of production that define the item.

Variance will increase as we move down the items in the profit and loss account. The message is that even if there is a low variance in the input variables (sales, prices, exchange rates, costs etc.) metrics like Noplat, Free Cash Flow, and Economic Profit and ultimately the Value of Equity will have a much higher variance.
01/01/2008
Projects we have done
Consultancy, in contrast to selling software products, is quite a delicate process. Trust is the most important asset to successfully completing a project, and S@R customers consider discretion to be important. That’s why we have decided to publish relevant contents – which provide insight into our methods of operation – only accessible in anonymous form and often collected from different projects.

The same applies to naming customers, but large projects has been performed in
- Finance
- Banking
- Pulp & Paper
- Airport Operations
- Brewery
- Aquaculture
- Mining & Quarrying
- Car parts
- Rail coach production
etc. – all for multinational companies.
01/01/2008