The Beginning of the Journey
- Post by: Valentas
- 2021-02-22
- Comments off
During our work experience, we have identified several issues with the current valuation system. We believe that solving these issues will provide more added value to the economy and well being of the nation.
Lack of holistic analysis approaches
The traditional approach to valuation mainly focuses on using historical data of an individual company, or real estate object. The valuators also try to consider the current and past trends of the market. However, only a few valuators try to estimate future trends and take into consideration risk. It is not that the valuators are not trying to estimate future trends, but they individually lack knowledge of multiple disciplines, which must be taken into consideration. For instance, to properly consider all risk related to a business valuation it is required to have knowledge of real estate, movable asset, and business valuation, together with statistical knowledge, expertise of economy and finances, and specific industry knowledge of the valuated business. Individually, it is impossible to become an expert in these various fields, especially when we live in turbulent times.
Increasing availability of data
Improvement of information technologies and trends for open data has provided access to valuable sources of data, which were not available previously. However, there is no integrated platform, where a user-friendly environment would be provided for valuators. Moreover, some of the available sources might not be valid enough to be used in official valuation reports. This is especially important when solving legal disputes.
Appearance of artificial intelligence
Due to growing computational power in the last decade, we have seen tremendous improvement in mathematical tools for valuators. Currently, there is a fight in the market if automated valuation models can be used by valuators. The problem is that today complex mathematical algorithms usually take as input a vast amount of data and provides a final price estimation, while the whole process is considered as a black box. Because of this issue, there is a need to provide support tools for valuators, which would help explain the black box phenomena.
Lack of official documentation
Due to the vast amount of approaches to valuation, growing data sources, and advanced application of mathematical algorithms there is a need to provide methodological documents. From one hand, these documents could be used by valuators to improve their practice and provide guidelines on how to correctly apply different mathematical algorithms or how to correctly interpret the data trends. From the other hand, these documents are essential when solving legal issues. All valuators must ground their decisions with official publications and reports, not only their own personal opinion.
We hope that you are agreeing with these issues and that our provided contribution will be beneficial to you, if you would be willing in supporting our research or collaborate, please do not hesitate in contacting us.