This is a fascinatingly powerful sector of analysis that enables:
These situations utilise simulation and optimisation, unlocking powerful possibilities far beyond static assumption driven simple sensitivity and scenario analysis. This level of analysis requires a highly robust financial model and a fresh approach to constructing core logic.
“How can I use this?” - well, you don’t need to be a statistician to appreciate your IRR or Profit analysis as a probability distribution with +/- 95% confidence intervals, including a mean and standard deviation is better than a one-off number. This approach can be readily incorporated within a Vector Financial Model; it’s how we analyse our own project investment opportunities.
For some inspiration; our recent assignments include:
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