When our clients perform a Risk Analysis and Monte Carlo simulation, they get the full range of possible outcomes, and the likelihood of each.
Risk analysis results from developing a tactical budgeting model. Identification of critical variables as well as estimation of ranges and scenarios are fundamental pieces of the analysis, requiring the participation of the whole team working on the project, which fosters teamwork and supports decision-making based on shared information.
Performing a risk analysis ensures that business decisions result in better execution of the planning process, optimizes return on investment and saves money during the investment phase.
Comprehensive analysis of one industry and its competitors largely relies upon getting substantial amounts of data.
Obtaining, analyzing and interpreting information on one market, a product or service, or past, actual or future clients for one product or service constitutes the base to execute a successful business initiative. This process provides information on clients, competitors and the overall industry structure, while enables entrepreneurs to evaluate the feasibility of their undertaking before committing large amounts of money via capital investment.
Market research yields relevant data to tackle marketing challenges and is an integral part of the planning process of a company. In fact, lack of market research hinders the process of choosing and developing a generic competitive strategy: cost leadership, focus or differentiation.
Strategic planning is a business theory that seeks to define business objectives, what results to achieve, who are the clients, what they value and how much are they willing to pay.
In today´s business world -where uncertainty and sudden change prevail- it is fundamental to develop strategies aimed to enable the corporation to achieve its goals.
The organization must clearly define what it does, how it does it, and where it is heading, based on long-term objectives. All members of the organization must be part of the planning process, which lets them know how their work aligns to the corporation goals. Thus, engagement and commitment rise substantially and performance follows suit.
Corporate and Project Valuation
Free cash flow valuation gives shareholders information about the value of their stock in a corporation as well as future foreseeable financial results.
One company´s performance during the previous fiscal years bears important information to build forecasting assumptions for each variable or account. Developing working hypothesis and then forecasting cash flows under such premises enables full analysis of future cash flows and corporate results. Forecast assumptions usually include needs for new capital investment.
In addition, past years financial statements provide information on borrowing, corporate debt policy and management approach towards debt. Eventually, working on capital structure adjustments can prove beneficial from the point of view of free cash flow valuation. It may be also useful to compare previous year’s corporate results to those obtained by the industry as a whole, to appraise corporate performance.
Corporate valuation is not complete without a sensitivity analysis to determine value performance under value drivers’ change. Then, a value range is created from these results, identifying opportunities for value creation and minimizing potential threats.
Performing a free cash flow valuation:
♦ provides fundamental insight to shareholders about the value of their investment in a corporation. It is an essential step before stakes of stock buy/sell transactions, as well as for mergers and acquisitions
♦ gives management a framework to evaluate future financial results
♦ offers an integral long-term vision of a corporation, enhancing business plan analysis
♦ allows for identification of value creation opportunities, based on value driver’s change analysis