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Financial sensitivity analyses and stress tests

Projecting the financial performance of a new online edition of a journal will be subject to multiple cost and income variables.These variables, and the inherent nature of projections, render precise financial estimates impossible, even when reliable market information isavailable.

The best a society can do is to test the sensitivity of its financial projections to ensure that the society is not unduly exposed inthe event that the society’s costs and/or income projections vary more than anticipated. To better understand the risk caused by this uncertainty, a societycan test the sensitivity of the financial projection for several key variables— including operating costs, institutional subscription adoption rate, andindividual member retention—to identify critical performance benchmarks that the society should monitor.

Operating cost sensitivity

A society can test its cost scenarios—for both development and ongoing operating costs—to determine the cost over-runs that thesociety could sustain before the journal’s net income would drop below an acceptable level. (The financial baseline described in “Establishing a FinancialPerformance Baseline,” above, provides a basis for determining an acceptable performance threshold.)

If such a stress test indicates that a society could incur one-time development and/or annual operating costs substantiallyhigher than those estimated for an online edition before falling below an acceptable financial performance threshold, then the society should have asufficient margin of error from a cost perspective. On the other hand, if a relatively slight cost overrun would lead to an unacceptable financial result,the society may need to reduce its development or operating costs, or adjust its pricing to provide a greater operating cushion.

Institutional subscription adoption rate sensitivity

While it is safe to predict that academic libraries will continue to prefer online-only subscription options, it is far moredifficult to determine specific uptake rates by medium for any given field or discipline, let alone for a specific title. It follows, therefore, thatprojecting revenue by format option after the launch of an online edition will be inherently imprecise.

If a society adopts a pricing approach (such as those described in Chapter Five’s “Member Publication Benefits” and“Institutional Subscription Format Options”) that renders it largely indifferent to the adoption rate of an online edition, even substantial fluctuations inuptake scenarios should have little effect on net income from subscriptions. However, a simple way to test income sensitivity by medium would be to run thejournal’s financial projection assuming a worst-case scenario wherein all institutional subscribers opt for the version of the service providing thelowest revenue contribution (see “Revenue Contribution,” above).

Individual member retention sensitivity

Chapter Three’s “Assessing Exposure to Online Licenses” describes how a society can estimate its exposure to potential riskposed by institutional online site licenses. Once a society has assessed the approximate risk to individual memberships it might face, it would be prudent todetermine the potential effect on net dues income were the society’s members to demonstrate less-than-anticipated commitment to the organization.

A society can project the net dues income that it would forgo (that is, member dues less the cost of providing all memberbenefits) were its membership base to decline n percent more than anticipated. The loss threshold that the society tests will depend on its confidence in its risk analysis. Ifthe society is confident in its estimate, it might use a lower percentage. Obviously, for most societies, any significant loss of membership would be moreimportant than the foregone dues income.

Questions & Answers

where we get a research paper on Nano chemistry....?
Maira Reply
what are the products of Nano chemistry?
Maira Reply
There are lots of products of nano chemistry... Like nano coatings.....carbon fiber.. And lots of others..
Even nanotechnology is pretty much all about chemistry... Its the chemistry on quantum or atomic level
no nanotechnology is also a part of physics and maths it requires angle formulas and some pressure regarding concepts
Preparation and Applications of Nanomaterial for Drug Delivery
Hafiz Reply
Application of nanotechnology in medicine
what is variations in raman spectra for nanomaterials
Jyoti Reply
I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
yes that's correct
I think
Nasa has use it in the 60's, copper as water purification in the moon travel.
nanocopper obvius
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
How we are making nano material?
what is a peer
What is meant by 'nano scale'?
What is STMs full form?
scanning tunneling microscope
how nano science is used for hydrophobicity
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
what is differents between GO and RGO?
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
analytical skills graphene is prepared to kill any type viruses .
Any one who tell me about Preparation and application of Nanomaterial for drug Delivery
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
The nanotechnology is as new science, to scale nanometric
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
what school?
biomolecules are e building blocks of every organics and inorganic materials.
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Source:  OpenStax, Transitioning a society journal online: a guide to financial and strategic issues. OpenStax CNX. Aug 26, 2010 Download for free at http://cnx.org/content/col11222/1.1
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