Part 1 of 3 in this podcast series “Challenging assumptions: Towards a new era of financial planning” in association with CityWire
Cash flow plans are only as reliable as the assumptions that underpin them, in this podcast we discuss this in more detail. We also look at the risks and limitations of relying on your own assumptions, and the shortcomings of straight-line projections.
Further to this, we consider stochastic forecasting, and why we can benefit from running a greater number of scenarios through the models that are in place. While there is a point at which this is no longer beneficial (this is roughly after 6,000 tests), planners can usually explain a plan and probabilities to clients with greater accuracy if more tests are run.