23 April 2024

From working for clients to educating students

For the second semester, our colleagues Samuel Zima and Norbert Skákala are teaching financial modelling at the Faculty of Finance and Accounting (FFU). The course has been a great success and a large number of students are enrolling in it. What was the inspiration for its creation? How does the course work and what are the latest standards in financial modelling?


Hi Samuel, Norbert, could you introduce yourselves briefly?

Samuel: Hi, of course. I'm a manager in the valuation and financial modelling department at Deloitte. I've been with the company for seven years now, and apart from valuation, I mainly specialize in financial modeling. As a team, we are part of Deloitte's Financial Advisory department, which also focuses on other areas such as M&A, Corporate Finance and others. Even today, many people still associate the Big Four mainly with audit or tax services, but we also do other interesting things.

Norbert: Hello, like Sam, I'm part of the Valuation and Financial Modelling team where I work as a Senior Consultant. Our team is primarily responsible for the preparation of valuations, whether whole businesses or individual parts. Aside from that, of course, we also do other things, one of the main ones being that we create or review different types of financial models for our clients. I have been with Deloitte for four years.

What is this financial model? What can the reader imagine by the term financial modelling?

Samuel: Simply put, a financial model is an Excel calculation where you typically try to simulate the future development of financial or even non-financial indicators. Probably the most common case is where you're trying to forecast what the future performance of a company will look like. This is usually done by building what is called an integrated model of the 3 basic financial statements - profit and loss statement, balance sheet and cash flow statement.

Norbert: Exactly. It's like creating a portrait of the company's future on an Excel canvas. Nobody can tell you exactly what the future will look like, what the reality will be. With a financial model, you're trying to simulate that reality based on appropriately chosen assumptions and all the information that is known when you create it. Moreover, by incorporating different scenarios, the possible future developments can be better captured.

What was the inspiration behind the creation of the Financial Modelling course at VŠE?

Samuel: We have been working with VŠE for a long time and we appreciate this mutual collaboration very much. We often give lectures at the university and we have had several successful events. Whether it was for example a "hackathon" in financial modelling, a competition for students, which was organized by my colleague Radovan Fišer, or my colleague Petr Čihák, who has long provided support to students in writing their theses by participating in the diploma seminar. In addition, we are now jointly preparing a major award conference, which will take place in less than a month.

Additionally, financial modelling has long been considered an area that is still unknown to many people (including students). If you work in finance, you will come across financial modelling in some form almost everywhere. Internal finance, consulting, banking or the investment world, everywhere financial models are used as a necessary part of the decision-making process. There are many financial modelling courses out there, but in my view, they remain somewhat inaccessible for Czech students. What is standard abroad is still finding its place here. That is why we decided to run a comprehensive course where students can learn a lot.

For us, this also presents the advantage of directly reaching out to the most talented students with potential collaboration offers, or having them apply to us on their own initiative. Interestingly, one of the graduates from our pilot course is now part of our team as a new colleague.

Could you describe the structure of the course and how it integrates lectures and practical exercises?

Norbert: Classes are held once a week for 90 minutes, usually a combination of lecture and practical exercises where you practice what was presented in the lecture. The course is designed for postgraduate students and is conducted entirely in English.

At the beginning of the class, we always introduce a selected concept from financial modelling and then leave the students space to solve the prepared practical exercises in Excel.

During the course, students have the opportunity to learn about standardized procedures for creating financial models, learn how to structure a financial model appropriately, and practice modeling financial statements or their individual parts. In addition, students are taught the principles of proper formula writing, have the opportunity to practice useful functions, and students also learn tips for working effectively with Excel.

At first impression, it may seem that you are just teaching students how to use Excel properly. Is there more to it than that?

Samuel: It's really not just Excel, which can be seen more as a tool in the context of financial modelling. Financial modelling, by contrast, is a much more complex issue and there are many factors that need to be taken into account by an experienced practitioner. The creation of a model needs to be thought through in advance - what will the model look like, who will use it, what will be the main parts of it and what is the main purpose of the model, i.e. what is the intended output.

Few people know that, in addition to, for example, valuation or accounting standards, there are also standards for financial modelling. I would mention, for example, the FAST standard or the ICAEW's Financial Modelling Code. There are a number of companies abroad that advocate these standards and specialise in this area. Adhering to them makes sense, as it reduces the risk of possible errors in models and contributes to greater transparency in the entire industry.

What is your vision for the future of the financial modelling course? Do you plan to expand your course offerings or collaborate with other companies or universities?

Samuel: We are currently not planning any major changes. We know that there is a lot of interest in the course, and we are trying to increase the capacity so that all students who are interested in the course have the opportunity to enroll.

In addition to teaching at the VŠE, we occasionally give lectures at the Institute of Economic Studies (IES) of Charles University, but it is on a much smaller scale.

In terms of cooperation with companies, we try to push and develop this area as well. Recently, we held additional workshops for bank employees on this topic and the feedback was positive. That is also confirmation for us that we are moving in the right direction.

How do you assess the level of students' readiness?

Norbert: As far as the readiness of the students is concerned, it varies, of course. We have students for whom financial modelling is something completely new, but we also have students who have already encountered modelling. We give students a lot of information, but we also try to make every class interesting.

Samuel: We give students the space to model inside the class, plus we're available all the time, so if someone really doesn't know how to proceed, we try to guide them step by step guide.

What challenges did you face in teaching financial modelling and how did you address them?

Samuel: For me personally, it's definitely giving lectures. Compared to working for clients, it's a bit different, plus financial modelling in Excel is more of a technical topic. We originally thought that it could be done without any major preparation, but now I know that if you want to give an interesting lecture, you have to spend some time on it.

Norbert: It's definitely the time spent preparing the materials. The students are curious and often have interesting questions. Sometimes it's hard to explain a concept right the first time in a way that even someone who hasn't seen modelling before can understand.

What opportunities do students have to further develop their financial modelling skills outside the classroom, for example through workshops, competitions or networking events?

Samuel: There are lots of online courses, some are free, some are paid. Nowadays, it is also possible to get certification for this field, I would mention for example the accreditations from the Financial Modeling Institute, which are probably the most known worldwide. For true enthusiasts, I would definitely recommend trying out the Financial Modelling World Cup (formerly known as Modeloff), a global competition where you can compete against the most talented people in the industry from around the world.

Norbert: If someone is truly dedicated, I highly advise students to allocate as much time as they can to mastering Excel. Like any other skill, modeling improves with practice— the more time you invest in it, the more proficient you become.

Finally, can you share any memorable anecdotes or experiences from your teaching?

Norbert: Nowadays, it's no surprise that with the development of artificial intelligence (AI), students are trying to make their lives easier. In one assignment, it was clear that one of our students used AI to write formulas for him to calculate in Excel. While checking the solution, we found that the formula was unnecessarily complex, and moreover, it did not work correctly when the input values were changed. Although we are also exploring the use of AI to work more efficiently, what happened reinforced our belief that one cannot blindly use AI without fully understanding the theoretical concepts.

Samuel: For me personally, there are a lot more highlights. In retrospect, I would definitely go back to the pilot course, where initially it looked like there wouldn't be much interest in the course. We ended up at full capacity with 22 students from 6 countries.