Workshop on How to Forecast Corporate Financial Crisis

Every company has potential to experience financial crisis due to external market factors as well as internal factors. Predicting when a crisis will happen is a very tough ordeal to make. However, the potential for a crisis can be calculated based on the probabilistic nature of the crisis. By using the right method, the probability of a corporate financial crisis happening as well as the potential loss occurring when crisis happens can be estimated.

 

This training focuses on how to calculate the potential loss and probability of a financial crisis happening in a company. The method is considered unique in nature because there are several important tools used and combined. Financial projection is a tool to predict the financial condition of a company by developing the future financial statement of the company. Balance Sheet Approach is a powerful yet little used model which is capable of calculating the probability of failure and potential loss happening. This method is based on option valuation model and be extended to forecast the crisis potential of a company. Stress testing is commonly used to model the potential loss occurring based on certain scenarios where the scenarios are developed based on qualitative assessment. By combining those tools, we can develop a workable model to predict the probability and potential loss of a crisis based on current and future condition of a company.

 

This training is practical in nature with Excel or spreadsheet based models which can be applied directly in any company situation. The training is packed with case study for better comphrehension and applicability. This training is developed based on some part of Professional Financial Modeler (PFM) Certification Program Curriculum. Participant who are PFM Designation Holder will get full recertification credit when attending this training program.

 

Who must attend this training?

– Risk Management Specialist an

– Corporate Planner

– Strategic Management

– Corporate Financial Modeler

– Financial and Research Analysts

– Designation Holder and Candidate to Professional Financial Modeler (PFM)

 

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Day 1
Time Session Topics
08.00 – 08.15 Preparation and Course Outline
08.15 – 10.00 Session One Financial Corporate Crisis Defined
10.00 – 10.15 Coffee Break
10.15 – 12.15 Session Two Key Factors to Determine Financial Crisis
12.15 – 13.15 Lunch Break
13.15 – 15.15 Session Three Understand Financial Projection and Tools to Determine Corporate Financial Crisis
15.15 – 15.30 Coffee Break
15.30 – 17.00 Session Four Understand Stress Testing
Day 2
Time Session Topics
08.00 – 10.00 Session Five Case Study: Stress Test Model
10.00 – 10.15 Coffee Break
10.15 – 12.15 Session Six Understand the Concept of Balance Sheet Approach
12.15 – 13.15 Lunch Break
13.15 – 15.15 Session Seven Understand the Concept of Probability and Potential Loss
15.15 – 15.30 Coffee Break
15.30 – 17.00 Session Eight Case Study: Modeling the Potential Loss and Probability Based on Corporate Balance Sheet Approach
Day 3
Time Session Topics
08.10 – 10.00 Session Nine Assessing the Future Potential Loss Based on Corporate Financial Projection
10.00 – 10.15 Coffee Break
10.15 – 12.15 Session Ten Connecting Loss Prediction by Using Balance Sheet Approach with Stress Testing Scenarios
12.15 – 13.15 Lunch Break
13.15 – 15.15 Session Eleven Corporate Crisis Risk Mitigation Strategy
15.15 – 15.30 Coffee Break
15.30 – 17.00 Session Twelve Case Study: Formulating Mitigation Strategy and Assessing Potential Crisis


Session 1

Financial Corporate Crisis Defined

Content

What is Financial Crisis?
Financial Crisis in corporate
Limitation of what constitutes a crisis
Mini and major crisis
Systemic effect of a crisis
Understand amplification effect
The impact of financial crisis to company balance sheet

Session 2

Key Factors to Determine Financial Crisis

Content

Overview of major corporate crisis key factors
Internal and External triggers
Market and non market parameters
Explanation on the impact of factors
Correlational effect of cross factors
Case Study

Session 3

Understand Financial Projection and Tools to Determine Corporate Financial Crisis

Content

Understand the format of generic financial projection on financial statement: assumptions, accounts, Balance Sheet, Income Statement and Cash Flow Statement

Case study: reviewing the financial projection based on the file given
Overview on various corporate financial crisis tools
The use and limitation of each tool

Session 4

Understand Stress Testing

Content

What is stress testing?
Unidimensional and Multidimensional stress test
Historical or conditional scenario
Developing scenarios based on probabilistic measure
Forming alternative
Checking the plausible alternative
Case Study

Session 5

Case Study: Stress Test Model

Content

Managing multi facet stress test
Interpreting the result
Backtesting result based on historical data
Assessing the relative probability of an event occurring

Session 6

Understand the Concept of Balance Sheet Approach

Content

Understand the principal of balance sheet approach
Understand about basic option concept
Application of option concept in corporate balance sheet
Deriving corporate volatility based on market and performance approach
Understand option valuation model Applying option valuation model in corporate financial statement
Case Study

Session 7

Understand the Concept of Probability and Potential Loss

Content

Understand the probability of default and potential loss
Calculate probability of default and potential loss based on option valuation model
Applying the concept of default and potential loss based on option valuation model on corporate financial statement
Modeling crisis by adjusting volatility to reflect volatility on crisis
Applying the concept of default and potential loss on crisis

Session 8

Case Study: Modeling the Potential Loss and Probability Based on Corporate Balance Sheet Approach

Content

Case Study on modeling probability and potential loss based on normal condition and crisis condition by using Balance Sheet Approach

Session 9

Assessing the Future Potential Loss Based on Corporate Financial Projection

Content

Applying long term financial projection to predict potential loss and corporate crisis
Understand the concept of term structure on crisis probability and potential loss during crisis
Comparing the crisis probability term structure with bonds yield curves
Case Study

Session 10

Connecting Loss Prediction by Using Balance Sheet Approach with Stress Testing Scenarios

Content

Determine important risk factors in stress test scenario
Determine the impact of risk factors in company financial statement
Prediction of loss potential and crisis probability by using Balance Sheet Approach
Comparing the result of using BSA with stress testing result

Session 11

Corporate Crisis Risk Mitigation Strategy

Content

Examine various mitigation strategies: on balance sheet vs off balance sheet
Formulating mitigation strategy
Determining the impact of expansion and indebtness on corporate crisis potential
Determine trade off between risk and return
Simulating the potential loss and crisis probability based on mitigation strategies taken

Session 12

Case Study: Formulating Mitigation Strategy and Assessing Potential Crisis

Content

Prepare mitigation strategy alternatives
Adjusting company financial statement based on the strategy taken
Calculate probability of crisis and potential loss during crisis

 

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