In financial modelling we work with a financial entity or "system". The entity exists both in the real world and in the "model" world.
The financial system we are modelling responds to its drivers. Key metrics of the system are of particular interest to us. Often those metrics will move in opposite directions. For example - maintaining a high level of capacity will minimise peak response times but will maximise carrying costs.
The key metrics will feed into a decision making process which will then determine the best application of resources (financial, human, organisational) to generate an optimal outcome.
Decision-making in business is inherently challenging: The aim is to achieve an optimal outcome within a framework of self-imposed and externally set constraints. That must be done by applying scarce and expensive resources to a competing range of priorities in a risky environment. To aid in that process a financial model can quantify key metrics and performance indicators.
Following are snapshots from the notes.