The Operis approach to communicating issues and why it works

 

There’s a rhythm to our model audits. If you have ever had the joy of participating in one, you’ll know that the ball gets kicked between the project’s advisory team and us. The modeller sends versions of the financial model. We send back issues reports.

 

It might not be explicitly written in our contracts, but a model auditing team has three jobs:

  1. ACTUALLY AUDITING (obviously) –the model should be cleared of material errors.
  2. DELIVERING TO DEADLINES – under no circumstances should the audit become a bottleneck.
  3. LIGHTENING THE LOAD –the audit should be easy for other (busy!) stakeholders to navigate.

 

We think our issues report process is the most effective way of balancing these needs.

 

LOOKING FOR THE BIGGER PICTURE

To parallelise the model review along the general progress of the transaction, we break it down into chunks.  Revenues, costs, tax and financing might all be reviewed by different people.  We teach our team to focus on the project, not the spreadsheet formulae, and to express the issues they find in terms of the impact on cashflows, cover ratios and returns.  A model audit often takes place at the home stretch towards financial close.  We know what the other parties care about at this point is materiality so we focus on that also, through careful consideration and ranking of any issues found.  Our analysts learn quickly (we hire bright people and teach them well), but there is something to be said for experience.  Our managers have seen hundreds of projects, and one of them takes ownership of the audit from start to finish.

 

Every issues report is reviewed by the relevant audit’s manager.  They can sniff out when queries raised by different members of the team relate to the same underlying point so collating all the issues together in one report rather than releasing them piecemeal allows us to catch repeated points or connect the dots on separate issues which when read together produce a more meaningful result.  Our managers order the issues and put the most material ones front and centre. Crucially, they ensure that our points and recommended actions are expressed clearly and concisely. This minimises wasted time and misunderstandings between the model author and the auditing team.

 

A common misconception is that the model auditor is out to get you or show up the model author so sometimes model audits are approached with caution.  At Operis, we are here to support the modellers – most of our team do a mix of modelling and auditing and so we know how it is to sit on both sides of this relationship!  We understand the time pressures and complexity involved in modelling. Under those conditions everyone sometimes make mistakes, and there can be miscommunications elsewhere in the process resulting in the model and documentation not aligning.  We are not here to point out errors to make others look bad; we are here to make sure the model represents the transaction.  Ultimately, we are all working towards the same goal – getting the project over the line so others can get on with the business of building it, so it can contribute to the rest of society.

 

FLEXIBLE APPROACH

Of course, nothing is ever one size fits all.  For a standard audit with a standard timeline, this process works.  We release our first issues report after a full review of the model; that front ends the work. Flushing issues out early is important.  The model’s results will likely be circulated to a wider audience as the deal approaches sign off so it’s better for all involved if any changes necessary are put through sooner rather than later.

 

For tight timelines we can release an interim report before the full review has been completed.  We can agree dates that issues reports and models will be exchanged, so all parties can plan their work. Interim milestones help keep things on track, avoiding a mad scramble at the end of the process.

 

Our issues reports are Word documents (more on that below), but if it’s helpful we can also send the issues in an Excel file.  If there are a few lingering points as we approach sign off, then communication is often by email and phone call.

 

ACCESSIBLE TO ALL

The main user of our issues reports is the model author, and the document is tailored to make it easy for her to understand, prioritise and resolve the issues.  However, there are other parties who care about the model audit.  Funders might want to be reassured that the audit will be ready in time, or shareholders may want to know what outstanding points may affect their returns.

 

That is why our issues report takes the form of a Word document, written in plain English.  It states which auditing tasks have and haven’t been undertaken.  It notes the outstanding issues (classifying them by severity).  It states any points that will be mentioned in our sign off letter.  It’s a one stop shop for any party who wants to know, “Where are we with the model audit?”

 

Our team are always happy to discuss any points over email, phone call or video call (it’s particularly lovely putting faces to names).  With our team split between London and Toronto, we have good coverage of many different time zones.

 

If you’d like to discuss a model audit with us, please do get in touch: info@operis.com.

Share now

Authors

CONTACT US

Please get in touch with either of our regional offices.

https://www.operis.com/wp-content/uploads/2022/11/22_09_Chris_A-0376.jpg
Chris Aldred
Head of Advisory

+44 207 562 0433

[javascript protected email address]
https://www.operis.com/wp-content/uploads/2021/03/Jun-Tao-500x500.png
Jun Tao
Director

+44 207 562 0428

[javascript protected email address]
https://www.operis.com/wp-content/uploads/2021/04/019A5891_Michael.jpg
Michael Jarman
Director

+1 647 243 8016

[javascript protected email address]
https://www.operis.com/wp-content/uploads/2021/05/Philip-Allen-500x500.jpg
Philip Allen
Head of Training [javascript protected email address]

Operis Europe

View Google Map
+44 207 562 0400
[javascript protected email address]

Operis North America

View Google Map
+1 647 846 7382
[javascript protected email address]

CONTACT US

Discuss your requirements with us

https://www.operis.com/wp-content/uploads/2022/11/22_09_Chris_A-0376.jpg
Chris Aldred
Head of Advisory

+44 207 562 0433

[javascript protected email address]
Name(Required)
This field is for validation purposes and should be left unchanged.