ASSUMPTIONS

This is a sample template to illustrate how risk analysis can be integrated into planning and decision making. This page should be adopted and replace the inputs or assumptions used ina financial model.

1A Add volatility to existing assumptions 2 Run first simulation 3 Run second simulation

Assumption name Value Risks identified by DT, DD, RM Initial range Source Proposed mitigations Updated range Comments Correlations

Based on the risks identified the Once the first simulation is performed one of Based on the risks
List of risks identified that may impact each management has to determine the the following is possible: identified and the
assumption, both positively and negatively. 90% confidence interval for the 1. The likelihood of achieving objective is additional
Name of the assumption used
Value of the Sources of information could be historical assumption. The range of values in acceptable, no further mitigation is required mitigations the
in the decision model. For Correlations between
assumption data, external industry research, interviews which actual may fall 90% of the time. Source of information 2. The likelihood of achieving objective is not management has Source of information, justification and other
example, USD/EUR exchange assumptions
originally used by with experts or other. More than one risk can The management should also and justification acceptable, the management needs to come to update the 90% comments
rate, sales growth from year (-1 to 1)
management be identified for each assumption. Need to determine the likely shape of the up with additional mitigations and record confidence interval
to year or inflation
also apply Key assumptions check distribution used for representing this them here for the assumption
methodology. assumption behavior (PERT, 3. The decision is too risky and needs to be and re-run the
lognormal, poisson, etc.) droped simulation

1B Add risk events (optional) 1С Add correlations

Sometimes it may be necessary to add events that if happen will have a dramatic effect on the business. Usually To keep the model outputs realistic it is critical to identify and document correlations between assumptions.
such impact is not captured in the volatility above. Examples could include political events that if happen may Use the space below to create correlation tables and paste the correlations into the register above.
affect many parts of the financial model or a major delay in opening a new plant.

Risk description Probability Impact Variable A Variable B

The description of the risk
scenario, for example
consutruction delay
Probability that
Overview of the different scenarios how this
risk happens, can
risk may affect the financial model if it does
be represented
occur, for example delay be zero, 1, 3 or 15
by Bernoulli
months
distribution