Modelling is an inherently difficult and complex task. At F1F9 we build financial models using an Agile approach – here’s why:
Most guidance on managing the model build process recommends a traditional life-cycle approach of Specify, Design, Develop, Test, Deploy.
When applied to most financial modelling assignments this approach doesn’t work.
It is too inflexible and relies on being able to fully specify the model at the beginning, which is rarely the case.
Software developers realised this a while back and developed an a more collaborative and iterative methodology called Agile.
The Agile Manifesto states a preference for individuals and interactions over processes and tools; working software over comprehensive documentation; customer collaboration over contract negotiation; responding to change over following a plan.
Agile approaches also work for building financial models. This isn’t a surprise because financial modelling is a lot like software development.
Agile is about short, strictly time limited, iterative development cycles called “Sprints”.
Agile relies on shared standards and modular code.
This will make it a challenge for many modelling firms to implement.