Plans based on average assumptions ……
Don’t worry about the average, worry about how large the variations are, how frequent they occur and why they exists.
Don’t worry about the average, worry about how large the variations are, how frequent they occur and why they exists.
Let’s say that the board have sketched a future desired value of the company’s equit, and that you are left to find out if it is possible to get there and if so – the road to take …
We know that forecasts based on average values are on average wrong. In addition will deterministic models miss the important uncertainty dimension that gives both the different risks facing the company and the opportunities they bring forth.
In our world ‘the best possible analysis’ means that we have a model ‘good enough’ to describe the business under study. The question then is – do we need to take into account the uncertainties that always will be inherent in its operations and markets? And if we have to, is it possible?