Technical Guides

Model Review and QA Workflow

Model review and QA workflow is the internal process lifecycle a modelling team runs on a financial model before it is relied on externally — build, self-check, peer review, and sign-off. This page is not a description of how FMAE audits a model — that is the subject of Audit Methodologies for Financial Models, a distinct page addressing FMAE's own deterministic rule-based engine. This guide addresses the general process a modelling team runs internally, independent of any specific standard, methodology, or audit tool, and applicable whether or not the model is later submitted for independent audit at all.

Model Risk During Transactions

Model risk during a transaction concentrates in mechanics that do not exist in either party's ordinary-course, standalone model — purchase price allocation, financing structure, pro-forma consolidation, and synergy assumptions — each a new potential point of structural failure introduced specifically by the transaction itself. This guide maps where that risk concentrates and why it is structurally independent of whether the underlying business being acquired is fundamentally sound.

Monte Carlo Simulation for DCF Valuation

Monte Carlo simulation extends sensitivity and scenario analysis by modelling a full probability distribution of DCF outcomes, rather than a small number of discrete cases, drawing each input from a defined probability distribution — potentially correlated with other inputs — across thousands of iterations. This guide sets out why this differs from and complements the existing sensitivity, scenario, and tornado approaches, how to define input distributions for key DCF drivers, how correlation between inputs should be handled, the practical run-time approaches available (native Excel Data Tables, add-ins, and custom VBA or Python implementations), and how to interpret the resulting output distribution — percentiles, expected value, and the probability of value falling below a given threshold.

Multi-Currency Project Finance Models

Cross-border project finance transactions frequently combine revenue in one currency, particularly where offtake or availability payments are priced locally, with debt denominated in a different currency, most commonly US dollars or euros, creating a currency mismatch that must be either hedged or structurally matched. This guide sets out how to model FX hedging mechanics, back-to-back and matched-currency facility structures, and cross-currency swaps, and the common errors that misstate a project's actual, unhedged currency exposure.

Named Ranges in Financial Models

A named range in Excel is a cell or range of cells that has been assigned a descriptive name through the Name Manager, allowing formulas to reference the name rather than the cell address. Named ranges improve formula readability and reduce errors from incorrect cell referencing in large models. However, they introduce structural risks when they are deleted, renamed, or allowed to accumulate as an unmanaged inventory: formulas that reference a deleted named range display #NAME? errors, and formulas that reference a renamed named range silently reference the wrong range if the old name is reused with a different definition.

Nature-Based Finance Models

Nature-based finance funds reforestation, wetland restoration, biodiversity credit, and similar nature-positive activity, sharing some mechanics with carbon offset project modelling but requiring its own treatment of longer verification and payback cycles and the challenge of valuing co-benefits, biodiversity, water quality, community resilience, that extend beyond a pure carbon metric. This guide covers how these structures should be modelled distinctly from pure carbon-focused offset economics.

Net Stable Funding Ratio

The net stable funding ratio (NSFR) tests whether a bank's longer-term assets are backed by a stable enough funding profile over a one-year horizon, complementing the short-term liquidity coverage ratio. This guide covers how to model the NSFR's two components — available stable funding, weighted by the behavioural stability of each funding source, and required stable funding, weighted by the tenor and liquidity of each asset — and how it connects to the balance sheet forecast and deposit modelling already built elsewhere in the model.

O&M Financial Models

An O&M financial model represents the operating cost, contract structure, and performance incentive mechanics of an outsourced or in-house operations and maintenance arrangement for an infrastructure asset, across sectors including transport, water, and social infrastructure. This guide covers how to build an O&M financial model at this general cross-sector level: the contract types an O&M arrangement typically takes, how cost pass-through and fixed-fee structures differ, and how performance incentives and deductions should be modelled as a distinct mechanic from base O&M cost.

OPEX Recovery Modelling

How much of a real estate asset's operating expenditure is recovered from tenants, rather than borne by the landlord, depends on the lease structure, gross, net, or triple net, and this recovery basis should be modelled explicitly per lease since it directly determines what actually flows into the landlord's net operating income. This guide sets out how each lease structure's recovery mechanics should be represented, and why a mixed portfolio requires lease-by-lease, not portfolio-average, treatment.

Offshore Project Models

Offshore project models must account for the specific cost and risk drivers of developing hydrocarbons at sea, fixed platforms, floating production storage and offloading (FPSO) vessels, and subsea tiebacks, each with materially different capital cost and operating profiles, alongside weather-driven downtime and logistics costs that do not arise onshore. This guide sets out how offshore models are structured around these facility choices and risk factors.

Offshore Wind Models

Offshore wind shares the core wind farm modelling mechanics of an onshore project but carries a materially different cost and operating structure: substantially higher capital cost and specialized foundation and marine installation requirements, operations and maintenance access constrained by weather windows and marine logistics, and dedicated export cable and offshore substation infrastructure that an onshore project does not require. This guide covers each of these offshore-specific mechanics.

Oil & Gas Documentation Standards

An oil and gas financial model requires documentation beyond standard model documentation practice: a clear reference to the specific reserve engineering report and its version, citation of the actual fiscal or commercial contract terms modelled, the source and date of the price deck used, and evidence of the decommissioning financial security in place. This guide sets out these documentation requirements, so a model's technical and commercial basis remains traceable and independently verifiable after the fact.

Oil & Gas Due Diligence

Financial model due diligence on an oil and gas transaction requires checks beyond general transaction due diligence practice: reconciling the target model against its underlying reserve engineering report, confirming production sharing contract or joint venture terms transfer correctly to the acquirer, and quantifying any decommissioning liability being assumed. This guide sets out these sector-specific due diligence checks, extending the general financial model due diligence and transaction due diligence disciplines already covered in the Knowledge Centre.

Oil & Gas Financial KPIs

Oil and gas performance is measured against a defined set of sector-specific KPIs that a generic corporate metric set does not capture: reserve replacement ratio, finding and development cost, lifting cost, netback price, reserve life index and EBITDAX. This guide sets out what each KPI measures, how it is calculated, and why reading them together, rather than any single metric in isolation, is required to assess whether a company or asset's production is genuinely sustainable.

Oil & Gas Financial Modelling Best Practices

This guide synthesises the Oil & Gas Financial Modelling domain into three disciplines that together define institutional best practice: building each segment, upstream, midstream, downstream, and LNG, on its own structurally correct basis; maintaining fidelity between the model and its underlying reserve, fiscal, and contractual basis rather than approximating any of them; and connecting validation, assurance, and governance into a single, demonstrable, ongoing programme rather than isolated review events. This page is the standing reference point for evaluating any oil and gas financial model against the domain's accumulated guidance.

Oil & Gas Independent Model Assurance

Independent model assurance for an oil and gas financial model is most effective when its review cadence is tied to the events that actually change the model's basis, a new reserve engineering report, a reserve-based lending redetermination, or a material fiscal or contractual change, rather than a generic annual cadence alone. This guide sets out how to structure an ongoing assurance cycle around these trigger events, connecting periodic independent review with the validation and governance practices covered elsewhere in this domain.

Oil & Gas Industry Overview

The oil and gas industry is not a single business but four structurally distinct segments, upstream exploration and production, midstream transport and processing, downstream refining and petrochemicals, and LNG, each governed by different revenue mechanics, asset lives and risk drivers. This guide sets out the industry structure that underlies every model built anywhere in the value chain, and why a modeller's first task is correctly identifying which segment, or combination of segments, a given asset or company sits in before selecting a modelling approach.

Oil & Gas Investment Committee Review

An investment committee reviewing an oil and gas Final Investment Decision submission should confirm a set of sector-specific disclosures beyond a general investment committee review: the reserve category basis presented, the fiscal regime and its specific mechanics, and whether both base and stress price scenarios have been presented rather than a single case. This guide sets out these confirmation points and extends the Knowledge Centre's general Investment Committee Model Checklist with oil and gas-specific review requirements.

Oil & Gas Investment Lifecycle

Oil and gas capital projects move through a defined lifecycle, exploration, appraisal, Final Investment Decision, construction, production, and eventual decommissioning, and the financial model's purpose, structure and level of detail should change at each stage. This guide sets out what each stage requires from a financial model, why Final Investment Decision is the single most consequential gate in the sequence, and how a model appropriate to an early stage becomes inadequate, and a model appropriate to a late stage becomes excessive, at a different stage.

Oil & Gas Lender Model Review

A lender reviewing an oil and gas financial model, whether ahead of a reserve-based lending redetermination or a project finance drawdown, applies checks specific to the sector on top of the general lender model review discipline: independent borrowing base replication, reserve report currency, and hedging programme compliance. This guide sets out these sector-specific review points and how they extend the Knowledge Centre's general Lender Model Review Checklist.