Errors will happen. It is an unfortunate fact of life, whenever humans are involved with complex data manipulation and modelling, errors occur.
A financial modelling manager needs to create an environment where any member of the modelling team can feel comfortable notifying them as soon as an error or mistake is identified.
Having confidence in your team, that they will inform you of any problems is the only way you will be able to sleep at night. When you are told about a modelling ‘glitch’ your gut reaction may be a terrible sinking feeling and overwhelming desire to spring forth with a barrage of expletives. Try to resist this urge; it will not encourage the team to come forward with issues in the future.
The best response is to take a deep breath, say “thanks for letting me know, these things happen” and ask “how can we fix it and make sure it doesn’t happen again?”
Below is a quote explaining F1F9’s approach, from Morten Siersted, F1F9’s founder.
“In 2005 we set up the world’s first offshore financial modelling team. There were, as you can imagine, a number of key challenges and questions. One was: how do we create a truly team-based and collaborative modelling culture?
10 years on, with 50 wonderful colleagues in New Delhi, I’d like to think we’ve done just that. With the benefit of hindsight, one of the key ingredients has been an unconditionally trusting and constructive approach to mistakes, specifically:
– Expect mistakes. He who does not make mistakes, cannot be doing anything.
– Real learning comes from doing (not from spectating from the side-line).
– Share mistakes. Communicate mistakes immediately and widely. This both de-personalises
them and may even impress the client.
– Learn from mistakes. Keep a “lessons learned” log — for others to read and learn from.
– Making a mistake once is part of learning, making it more than once means you’re not learning.
– In my book this applies primarily to the organisation (and of course also to the individual).
– In the first instance: blame the teacher. To paraphrase Mr Miyagi from The Karate Kid, “No such
thing as bad student, only bad modelling trainer”.
– Ultimately: senior management – you only have yourselves to blame.”