Analytics in business has different forms thatare applicable for individual directions. The calculation methodology is well developed, and for some types of performance miscalculations there are optimal types of evaluation. When it comes to predicting the impact of various factors on the profitability of an enterprise and the likelihood of achieving target financial indicators, one of the most common and applied is GAP analysis.
Principle of the technique of rupture
The GAP analysis technique assumes that there isor a strategic gap is formed between the assumed and actual levels in the individual parameters of the enterprise's operation. As an optimistic indicator, a strategic goal is set, which the management of the organization wants to achieve when doing business. Under actual indicators we mean actual successes of the enterprise in the analyzed direction, sphere of activity.
It should be borne in mind that it means stablethe level attained by the current policy of functioning, and not the peak indicators, which depend on random factors. Figuratively speaking, the GAP analysis method is an "attack" aimed at eliminating the gap (gap) existing between the intended and real results of the enterprise's activities.
The essence of the method of discontinuity on a concrete example
Often, business analysts have problems,when they are asked to conduct a GAP-analysis. An example of using the gap method for credit institutions is very revealing and simple enough to understand. Usually, in the short term, the quantitative effect of the adjustment of the rate on the final interest margin is also estimated, also called net profit (net interest income). As part of the GAP analysis, it can be represented as the difference between "Interest Income" and "Interest Expense".
GAP = RSA - RSL,
where the RSA is understood as sensitive to changes in the market interest rate assets, and under RSL - liabilities. GAP is expressed in absolute values - units of currency.
- Outgoing interbank credit (interbank credit);
- loans, in terms of issuance of which provides for a revision of the interest rate;
- short-term securities;
- loans granted on a "floating" interest.
- deposit agreements with the possibility of revision of the rate;
- securities with a "floating" rate;
- incoming inter-bank loan;
- deposits with a "floating" percentage.
What does the GAP value mean
As can be seen from the example above, the Bank's GAP analysisassumes a quantitative difference between assets and liabilities. The final value can be positive, neutral and negative. Pay attention, the positive indicator is not a guarantee of success. As part of the GAP-analysis, this shows that the bank is more sensitive to interest rates than the liabilities.
If the value is greater than 0, then during growthinterest rates the enterprise will receive additional income, in the opposite case - the interest margin will decrease. With negative GAP, the bank has a larger reserve of liabilities than assets that are highly sensitive to the rate. Accordingly, the growth of the average market indicator leads to a decrease in the NAP, and a decrease in the rate will be marked by an increase in profitability. The case where the GAP is zero is purely hypothetical and means that the change in interest rates on the market has no effect on the NPV.
Functional requirements for the system of enterprise regulation
When analysts fix a positive GAP,the manager must increase the volume of long-term assets with a firm interest rate. In parallel, the head must increase the portfolio of short-term liabilities with a high reaction to market interest. This strategy allows you to get more on profitable contracts and to lose less on debt obligations.
When GAP takes a value less than zero, measuresmitigation of the impact of interest rate volatility in the market should have a different character. They are not difficult to determine by analogy with the actions with positive GAP. When the gap method shows a value close to zero for a portfolio, it is worth paying more attention to seasonal changes in the behavior of the client base and, based on the forecast, to prepare for leveling the destabilizing factor.
The subtlety of applying the gap technique in practice
The choice of bank response measures depending on theThe situation on the market is not the only case when GAP-analysis is applied. Functional requirements for the system in real projects are quite a lot, but the level of influence of interest rates on individual elements of assets and liabilities is not uniform. Some of them react to market changes more strongly, another - less.
An important area is the use ofGAP-analysis to assess the results of earlier changes and the formation of a single statistical database. In the future, this will make it possible to identify the most effective levers for influencing the system and to increase the qualitative indicator of the recommendations of the analytical department for the management of the enterprise.
A few tips for managing GAP
Taking into account all the above, the following key principles of regulation can be singled out:
- Support for a diversified portfolio by sectors, terms and rates. To do this, it is necessary to collect the maximum number of securities and loan agreements that are easy to sell on the market.
- Creation of special plans for operations with each category of liabilities and assets, in different situations in a particular segment of the economy.
- Detailed verification of the situation on the market.Not always a change in the trend of movement of rates is the beginning of a cyclical change in the market. This may be a small adjustment, and panic response will lead to loss of profits and aggravation of the existing imbalance.