I’m a Model – You Know What I Mean

We would be supremely rich – albeit still writing these informative missives out of the goodness of our audit pumping heart – if we had a dollar for every time we have heard in our career that the model upon which a decision was made was fundamentally flawed and that is why the project was overspent / over time / someone else’s responsibility or all of the above.

It is within that context that we read with great interest recently a United Kingdom National Audit Office guide titled “Framework to Review Models”.

As the National Audit Office notes:

Models generate the information on which a wide range of decisions are formed, from forecasting policy outcomes to estimating the financial feasibility of major infrastructure programmes. Errors can be very costly and highly embarrassing.

To aid those seeking to determine whether a model is robust and reasonable, this framework covers seven stages from reviewing the model concept to ensuring that the outputs produced by the model are robust, well communicated and used by decision-makers. It covers issues such as governance arrangements, and the quality of data and assumptions.

There is no great science in what the National Audit Office has proposed and perhaps that is exactly the point.

A model – any model – should be able to be explained with ease to the least knowledgeable in the room.

If you cannot – that is the first warning sign of a model upon which a flawed future decision may be made.

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