About this lesson
An explanation of why models must be clear, concise, and fit for the purpose of key decision makers. Modelers should consider the logical flow of a model at the outset as well.
CRaFT - Transparency
Understand ‘Transparency’ in the CRaFT methodology.
When to use
A key concept in financial modelling ‘Transparency’ can help model developers create financial models that are clear, concise, and fit for the purpose intended. If you can follow it on a piece of paper (i.e. no Formula bar), it’s transparent.
- Many modellers often forget that key decision makers base their choices on printed material
- Models need to be clear, concise and cohesive
- Modellers should create assumptions, calculations and outputs that are recognisable instantly and user-friendly
- For example, the developer / reviewer should consider:
- the logical flow and dynamic linking of the model
- the number of categories required for particular calculations
- the nature of the assumptions together with their assumption entry methods at the design stage
- Do not use methods which are unfamiliar to others
- Avoid using uncommon functions
- Avoid array functions, where possible
- Do not hide rows and columns which contain relevant formulae
- Remember the Rule of Thumb – ensure the formulas entered into the formulae bar aren’t longer than your thumb. This will help to reduce the likelihood of errors
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