Schedules Announced for Risk Conferences in Copenhagen, Amsterdam, and Dubai

Presenters include Deloitte Risk Services,
Royal HaskoningDHV, Lego Group, DSM,
Saudi Aramco, Kuwait Petroleum

In their ninth year, the Palisade Risk Conferences have become “must attend” events for quantitative risk and decision analysis professionals. The schedules are set for Copenhagen, Amsterdam, and Dubai. Each day promises a full slate of intensive software training by Palisade trainers, in-depth looks at risk modelling from industry experts, networking opportunties, and the chance to review your own model with Palisade consultants.

Copenhagen, 31st March
Amsterdam, 3rd April
Dubai, 8th April



Other 2014 dates include Bogotá, Madrid, Perth, Brisbane, London, Frankfurt, Johannesburg, and Melbourne, with more dates to be announced soon.

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Enterprise Risk Management at Russian telecoms giant, MegaFon

Every year, the eight regional branches of Russian mobile network operator MegaFon are required to undertake a major planning and accounting exercise for the 12 months ahead. Each branch states the risks it faces, such as competition, changes in legislation that will require it to operate differently, price increases and changes to staffing costs. They also calculate how much each budget will be over or under the forecast.  

The risk management team at MegaFon’s headquarters amalgamates the information from each of its offices and simulates possible scenarios using a model using @RISK. The variables within these models are analysed in order to identify and mitigate against the five critical factors most likely to significantly affect the company’s gross revenue.

In addition, @RISK shows realistic minimum, best case and median budget figures and the probability of their occurrence. These are compared to the budget plans to determine whether the forecast is too aggressive or not ambitious enough. Overall, the management team can see whether their desired revenue is achievable.

At the same time, MegaFon needs to plan for the continuous upgrading of its network. Projects include building new antenna, installing the latest equipment and laying fibre optic cable. In 2012, MegaFon took the decision to invest in a large data centre construction project.

Two potential locations were shortlisted and the management team used the DecisionTools Suite to make an informed decision on the optimal one. TopRank was used to perform sensitivity analysis to identify the factors in each location that would have the most influence over the total cost of the project. @RISK was then applied to forecast how these critical factors might change. This allowed MegaFon to understand the most likely Net Present Values (NPVs) for each possible location and identify the risks for building or not building (i.e. opportunity cost) each data centre.

Using the DecisionTools Suite enables MegaFon to integrate risk management within its budgeting and investment planning processes. This provides the company’s management team with transparency and understanding about the risks involved in planning, and therefore facilitates decision-making without guesswork. As a result, the company can maximise capital expenditure efficiency.

» Read the case study: Enterprise Risk Management programme at Russian telecoms giant MegaFon

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Global Risks 2014 report Illustrates an Evolving Global Risks Landscape

You don't have to be a risk manager to know that the world faces a range of rapidly changing challenges. But how exactly are these risks changing, and which ones are the most likely, or the most impactful? The World Economic Forum attempts to answer these questions. The Swiss-based independent international organization  aims to improve the state of the world by engaging public, private, and academic leaders  to shape global, regional and industry agendas.

The Forum recently published their 2014 Global Risks Report, which analyzes a survey of over 700 leaders and decision-makers on 31 selected global risks. Survey respondents were asked directly to nominate their risks of highest concern, which placed economic and social issues firmly at the top.

The Risk Report distilled down the survey responses into  the five risks considered most likely and most impactful since 2007 (see below).

As the table illustrates, environmental risks, such as climate change, water scarcity, and extreme weather events have become more prominent since 2011, while health-related risks (pandemics and chronic disease) have become less so. Geopolitical risks such as global governance failure, are now less concerning  than socioeconomic risks (income disparity, unemployment, fiscal crises, etc.).

Cyber attacks are also featured prominently in the matrix, along with the breakdown of critical information infrastructure, reflecting the increasing digitization of economies and societies and their dependence on information and data.

Just as The World Economic Forum aims to help leaders and societies make decisions that will benefit the global community, Palisade's risk management software aims to support  managers and decision makers as they plan for changes to come.

Evolving Global Risks Landscape 2007 - 2014, World Economic Forum Global Risks Report

Click to view the expanded image.
Source: Global Risks reports 2007-2014, World Economic Forum.

 

See also: Using Risk Analysis to measure the impact of climate change

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Social Media Making Things Risky? Risk Analysis Essential for Businesses Wanting An Edge

Social media has become a boon to many businesses, and for others, it's a harmless distraction. Think again, says James Leavesley of CrowdControlHQ. In his article on Continuity Central titled "Why Social Media Media is Moving Up the Risk Register and Why Risk Managers Should Be Worried", Leavesley details how social media can open up a whole new realm of risk to businesses, and how they can manage these threats.

"An organization’s reputation can quickly be damaged through the instant spread of bad news or a negative incident via social media. Gone are the days when public affairs departments had time to consider statements to be released to the press, traditional media and customers in the event of a crisis happening,"  writes Leavesley. He continues, "In fact a crisis can even begin on social media. It only takes one disgruntled customer to take to Twitter, YouTube or Facebook and the results can be costly. Even worse, damage can be done by a disgruntled employee with access to corporate social media accounts and a determination to discredit the company."

What's a company to do? Leavesley says the first step is to identify the potential risks, such as the loss of control or ownership of the organization’s social media accounts, or failing to respond to negative posts. Once these potential threats have been determined, Leavesley says business managers should then record and manage all social media activity. This can be done by having a single dashboard that allows controlled access to all social media profiles, and individual log-ins that are only known by administrators in order to maintain security.

Finally, if a social media snafu does occur, Leavesley says mitigation is key. He says that social media channels should be kept open and audiences kept informed. "Openness and clarity are essential," writes Leavesley. 

Many businesses are learning how to harness social media to help them grow -- but it's the ones who also prepare for social media's unseen surprises that will truly profit overall. Social media continually offers new avenues of opportunity -- and risks -- for businesses. Risk managers need to keep these avenues in their sights.

 

 

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Lufthansa wins prestigious award for Risk Control tool built using @RISK

Palisade continues to make an impact overseas – this time, @RISK was used by the German airline company, Lufthansa, the largest airline in Europe. In 2012 alone, Lufthansa planes carried over 103 million passengers. 

Last April, Lufthansa received an award from the International Controllers Association for building a risk control tool which aided in planning and risk management of aviation business trends. @RISK played a key role in Lufthansa's work, and Palisade is proud to have contributed to this award-winning work.

See the original article (in German) here.

See also:   Palisade's Risk Analysis Solutions at Work in China

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Super Bowl XLVIII Prop Bets and Monte Carlo Simulation

There are a number of applications for risk analysis software and Monte Carlo Simulation, and most offer insight into solving pretty serious situations like public health, workplace safety, budgets, etc. From time-to-time, we find utilizations are less “mission critical” and more “cool.” Such is the case with Dr. Wayne Winston’s use of Palisade’s @RISK. Winston is a professor at the University of Houston, a sports probabilities expert and longtime user of @RISK. In a guest blog post in Risk Management Monitor, Palisade Vice President Randy Heffernan explored Winston’s utilization of Monte Carlo simulation, in relation to so-called “prop bets" for this Sunday's Super Bowl. From the article:

Most bets are relatively straightforward; however, if you’ve ever been to Las Vegas to watch the big game, you’ll find Super Bowl wagers are taken to an entirely different—and more complex—level. In addition to traditional wagers, you’ll find an almost unlimited number of proposition—or “prop”—bets that can stray into more peripheral aspects of the game. Consider the following prop bets from last year’s Super Bowl between the Ravens and 49ers:

  • Who will win Super Bowl MVP?
    Winning bet: Ravens’ QB Joe Flacco at 11/4 odds
     
  • What color will the Gatorade (or liquid) be that is dumped on the winning coach?
    Winning bet: Clear/water at 7/4 odds
     
  • Will Alicia Keys’ rendition of the national anthem be over/under 2:15?
    Winning bet: Over, at 2:42

In the article, Randy offers a comparison of Winston and Vegas’ confidence regarding the number of touchdown passes Broncos quarterback Peyton Manning will throw against the Seahawks on Sunday.

» Read Randy’s full article in Risk Management Monitor

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This Month: Introductory Risk & Decision Analysis Software Demonstrations in Four Different Languages

Introduction to Risk & Decision Analysis using @RISK & The DecisionTools Suite This month we are offering our Introduction to Risk and Decision Analysis using @RISK and the DecisionTools Suite webcast in a variety of languages including German, French, Portuguese and English.

Our Regional Sales Managers and Trainers have designed these webcasts to provide an entry-level introduction into probabilistic analysis and will show how Monte Carlo simulation and other techniques can be applied to your everyday business analyses. If you build models in Excel then Palisade solutions can almost certainly help you to make more informed decisions, right from your desktop.

Sign up today for the webcast presented in the language of your choice!

Deutsch:
Einführung zur Risiko - & Entscheidungsanalyse
mit @RISK und der DecisionTools Suite

11. Februar 2014 - 10:00 am CET
(9:00 am UTC/GMT, 4:00 am EST)
» Jetzt kostenlos registrieren

Français:
Introduction a l’analyse des Risques et décisions
avec @RISK et DécisionTools Suite

11 février 2014 - 10:00 am CET
(9:00 am UTC/GMT, 4:00 am EST)
» Inscrivez-vous gratuitement

English:
Introduction to Risk and Decision Analysis
using @RISK and the DecisionTools Suite

13 February 2014 - 11:00 am CET
(10:00 am UTC/GMT, 5:00 am EST):
» Register Now for Free

Português:
Análise Quantitativa de Risco Utilizando o
@RISK e o Decision Tools Suite

21 de fevereiro 2014 - 10:00 am Brasília Time
(1:00 pm UTC, 2:00 pm CET)
» Inscreva-se grátis

Também em Português, AMANHÃ:
Simulações de Séries Temporais com o @RISK
7 de fevereiro 2014 - 10:00 am Brasília Summer Time
(12:00 Noon UTC, 1:00 pm CET)


These webinars will explore some of the ways in which organizations are applying Palisade tools. From oil and gas, insurance and finance through to healthcare, defense and construction, @RISK and the other tools in the DecisionTools Suite enhance the decision making capabilities of some of the world’s most successful companies.

For nearly 30 years, Palisade software and solutions have been used to make better decisions. Cost estimation, NPV analysis, operational risk registers, portfolio analysis, insurance loss modeling, reserves estimation, schedule risk analysis, budgeting, sales forecasting, and demand forecasting are just some of the ways in which the tools are applied. The webinar will demonstrate how easy – and necessary – it is to implement quantitative risk analysis in any business.

If you would prefer to join us for a more in depth Training be sure to check out this previous post: Start the New Year Right with Palisade Risk & Decision Analysis Software Training

 

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Free Webcast this Friday: The Cure for the Flaw of Averages, Using Palisade DecisionTools Suite to Visualize Risk and Uncertainty

Presented by: Andrew Pulvermacher, Nighthawk Intelligence, LLC
When: Friday, March 21, 2014 at 11:00 am EDT

NightHawk Logo » REGISTER NOW for FREE

The Cure for the Flaw of Averages, Using Palisade DecisionTools Suite to Visualize Risk and Uncertainty will be presented by Andrew Pulvermacher of Nighthawk Intelligence, LLC. On Friday, March 21, 2014 at 11:00 am EDT, Mr. Pulvermacher will take you on a 50 minute journey through historical risk philosophies to today's industrial race to harness the benefits of risk based decision making. This session will cover the finer points of the Flaw of Averages and Probability Managements' cure of the Flaw of Averages. The presentation will wrap up with a demonstration of the immediate benefits that Palisade's DecisionTools Suite provides to the organizational decision making process through the illumination of risk and the interactive risk modeling.

Andrew Pulvermacher is the Founder and Chief Probability Officer at NightHawk Intelligence, LLC. NHI provides risk analysis services to their clients to develop high quality strategies through a better understanding of value in the context of risks and uncertainties. NHI works to transfer focus from descriptive data analytics to predictive analytics – improving insight and driving risk-informed decision making throughout the organization.

With over a decade of experience in analytics with companies such as Amazon, Best Buy, Merrill Lynch, and CUNA Mutual Group, Drew is focused on improving enterprise value through the use of Operation Research methodologies for enhancing productivity, efficiency, and profitability. With specific expertise in probability management, portfolio theory, and continuous improvement, Drew advances complex business processes and delivers innovative business development strategies for Fortune 20 corporations as well as small, community based businesses.

Click here to view his presentation from the 2013 Palisade Risk Conference in Las Vegas.

Learn more about last year's Palisade Risk Conference in Las Vegas here:
Risk Professionals Gather in Vegas for Palisade’s 2013 Risk Conference
 

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Palisade Celebrates 30th Anniversary in 2014

 
 

 

Leader in Risk & Decision Analysis Software for 30 Years

In 2014, Palisade Corporation celebrates 30 years as the leading developer of risk and decision analysis software. Since 1984, Palisade has been committed to developing the world’s most robust, innovative, and comprehensive software and solutions for risk analysis and decision support. Today, @RISK and the DecisionTools Suite are used by over 93% of Fortune 500 companies, helping executives and managers to make better decisions every day.

Across 30 years, Palisade has been gratified to build strong relationships with industry leaders such as Unilever, Merck, Petrobras, PricewaterhouseCoopers, Procter & Gamble, CH2M Hill, Shell Oil, Anglo American, and BorgWarner. In addition to supplying the software that aids in high-stakes decision-making, Palisade provides training, technical support, and custom solutions so that our customers have the tools needed to make strong decisions in the face of uncertainty.

We wish our colleagues and clients a happy 2014, and look forward to new opportunities and success in our fourth decade.

Happy 2014 from all of us at Palisade!




 

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Free Webcast this Thursday: "Using @RISK in Evaluating Full (late stage) Compound Development in the Pharmaceutical Industry"

Register now for a free webcast to be presented by Venkat Raman, A.C.A. MBA, Managing Principal of VR Advisors LLC.

"Using @RISK in Evaluating Full (late stage) Compound Development in the Pharmaceutical Industry" will discuss the financial evaluation of late stage development of compound in the pharmaceutical industry, but the rational, methodology and analysis discussed here has universal applicability to any multi-stage product development activities across industries. We will not discuss the real options analysis here, as this is not the intended objective of this presentation. But the webcast will:

  • Present the case - a miniature model of a full-blown real world case
  • Discuss the two financial models – the deterministic and the probabilistic models
  • Frame the case
  • Model the case
  • Discuss insights and results

JOIN US THIS THURSDAY - January 30, 2014 - 11:00am ESTRegister Now
"Using @RISK in Evaluating Full (late stage)
Compound Development in the Pharmaceutical Industry
"


Venkat Raman is a management consultant with over 25 years of extensive global experience in strategy and corporate finance across large and small enterprises. He began his career with the Big 6 and over the years has held leadership positions in the management consulting, insurance, technology services, and entrepreneurial ventures. Venkat brings his collective experience, wisdom, and judgment to every engagement. Venkat is an MBA from Indiana University, a qualified CPA, and a Chartered Accountant. Extended bio here.

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Custom Solutions within the Insurance Sector: Catastrophe and Large Loss Simulation Model

Insurance companies are now encouraged by regulation to perform assessment of their own risk exposure. Monte Carlo simulation, and particularly @RISK are extremely useful in performing assessments that can be used not only to satisfy regulators, but also to improve financial risk management within the company.

Waszink Actuarial Advisory in collaboration with Palisade's Custom Development Team created this Catastrophe and Large Loss Simulation Model to provide an output that includes the aggregate loss gross and net of reinsurance, and the reinsured loss.

In this example, an application was created using @RISK to generate the aggregate loss resulting from multiple large or catastrophic losses occurring within a given period of time. Aggregate losses are determined gross and net of any Excess of Loss Reinsurance.

Parametric distributions for frequency and severity of loss gross of reinsurance must be specified by the user. Frequency and severity are assumed to be mutually independent.

In addition, the user can specify an Excess of Loss Reinsurance program. The following features of the reinsurance program must be specified:

  • Number of layers
  • Limit and retention by layer
  • Reinsurance premium by layer
  • Number of reinstatements by layer;
  • Reinstatement premium as percentage of reinsurance premium

The output includes the aggregate loss gross and net of reinsurance, and the reinsured loss.

More example of Custom Development:

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Custom Solutions: Using @RISK for Oil Field Development Decisions

Oil companies need to assess new fields or prospects where very little hard data exists. Based on seismic data, analysts can estimate the probability distribution of the reserve size. With little actual data available, companies still must quantify and optimize the Net Present Value (NPV) of this asset. The number of wells to drill, the size of the processing facility, and the plateau rate of the field must all be optimized. The following example is a custom application written by Palisade Custom Development using @RISK’s XDK in Excel.

It is a custom application written by Palisade Custom Development using @RISK’s XDK in Excel.  - See more at: http://blog.palisade.com/blog/decision-making-under-uncertainty-2/how-to-create-a-custom-application-for-stock-portfolio-optimization-right-in-your-spreadsheet#sthash.0by9ZU0n.dpuf
It is a custom application written by Palisade Custom Development using @RISK’s XDK in Excel.  - See more at: http://blog.palisade.com/blog/decision-making-under-uncertainty-2/how-to-create-a-custom-application-for-stock-portfolio-optimization-right-in-your-spreadsheet#sthash.0by9ZU0n.dpuf
It is a custom application written by Palisade Custom Development using @RISK’s XDK in Excel.  - See more at: http://blog.palisade.com/blog/decision-making-under-uncertainty-2/how-to-create-a-custom-application-for-stock-portfolio-optimization-right-in-your-spreadsheet#sthash.0by9ZU0n.dpuf

Oil Field Development Screenshots

This analysis can be simplified by representing the production profile by three phases:

  1. Build up: The period when wells are drilled to gain enough production to fill the facilities.
  2. Plateau: After reaching the desired production rate (plateau), the period when production is continued at that rate as long as the reservoir pressure is constant and until a certain fraction of the reserves is produced. In the early stages of development, this fraction can only be estimated, and production above a certain rate influences plateau duration.
  3. Decline: The period when production rates, P, decline by the same proportion in each time step, leading to an exponential function: P(t) = P(0) exp(-c*t), where t is the time since the plateau phase began and c is some constant.

With only estimates for the total Stock Tank Oil Initially In Place (STOIIP = reserve size) and percent recovery amounts, the objective is to select a production rate, a facility size, and well numbers to maximize some financial measure. In this example, the measure used is the P10 of the NPV distribution. In other words, the oil company wants to optimize an NPV value which they are 90% confident of achieving or exceeding.

As described, the problem is neither trivial nor overly complex. A high plateau rate doesn’t lose any reserves, but it does increase costs with extra wells and larger facilities. However, facility costs per unit decrease with a larger throughput, so choosing the largest allowed rate and selecting a facility and number of wells to match might be appropriate.

This is just one example of how Palisade can provide personalized risk solutions for your business needs. We offer custom software development services as well as software developer kits to create your own applications integrating @RISK, RISKOptimizer, and other Palisade technology. We can also help automate Palisade software using VBA in Microsoft Excel or Project.

» Learn more about Palisade's Custom Development

You may also be interested in the following:

Free Webcast this Thursday: "Exploring Oil & Gas Applications of @RISK and the DecisionTools Suite" - See more at: http://blog.palisade.com/blog/risk-and-decision-analysis-news/free-webcast-this-thursday-exploring-oil-and-gas-applications-of-risk-and-the-decisiontools-suite#sthash.sev3ym2s.dpuf

Cost Risk Analysis Example Movie: Palisade's Custom Development Team uses @RISK's XDK for this custom application
 

 

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Start the New Year Right with Palisade Risk & Decision Analysis Software Training

Kick off the New Year with some fresh ideas presented to you by the Palisade Training Team. Our hands-on software training courses will take place in cities all around the globe. Join us for a training near you, to learn how to incorporate @RISK and the DecisionTools Suite into your models and help you make better decisions in 2014!

2014 Palisade Training Opportunities

Australia
Melbourne: 22-23 January 

Brasil
Rio de Janeiro: 29 - 31 de janeiro
São Paulo:19-21 de fevereiro
Belo Horizonte: 19 - 21 de março

Latinoamérica
México D.F - 28-30 de enero

EMEA and India
London: 28-30 January
Munich: 4-6 March
London: 4-6 March

US and Canada
Houston: 14-16 January
Ottawa: 11-13 February
Atlanta: 18-20 February
Washington DC: 4-6 March

» Register now for a Palisade  training seminar

Learn to Make Better Decisions 

For almost 30 years, Palisade software and solutions have been used to make better decisions. Cost estimationNPV analysisportfolio analysisoperational risk registersinsurance loss modelingreserves estimationschedule risk analysisbudgetingsales forecasting, and demand forecasting are just some of the ways in which Palisade software tools can be applied.

By attending a Regional Seminar, you can learn how to apply @RISK and the DecisionTools Suite to real-life problems. All courses include complimentary materials with dozens of example models, plus lunch and breaks. Professional development credits are available, including CPE, PMI, and AACEI.

By the end of a 2-day course, attendees should be able to perform defensible risk assessments using @RISK software. The 3-day course covers the other products in the DecisionTools Suite, including PrecisionTreeRISKOptimizerEvolverTopRankStatTools, and NeuralTools. Our trainings utilize @RISK and the DecisionTools Suite 6.2.

» Learn more about the new features in version 6.2

 

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Risk Professionals Gather in Vegas for Palisade’s 2013 Risk Conference

The 2-day Palisade Risk Conference in Las Vegas brought together around 170 decision-makers from a wide range of industries at the Mandalay Bay Resort & Casino.

In the ever-popular Software Presentations track, Palisade developers and trainers covered features of the DecisionTools Suite and @RISK. At the same time, 3 additional tracks featured experts from CH2M Hill, Westinghouse, Lockheed Martin, Intel, Premera Blue Cross, Tennessee Valley Authority, and many others. These presentations covered industry case studies from fields as diverse as aerospace, energy, agriculture, finance, healthcare, and many more.

» View presentations from the 2013 Palisade Risk Conference in Las Vegas

Mark Krahn presented at 2013 Palisade Risk Conference in Las Vegas

Conference attendees were also able to meet with Palisade consultants in one-on-one Expert Sessions. The Expert Sessions were well-received by both conference participants and Palisade consultants and trainers. Participants get a chance to bring their own models for the consultant to review, while consultants get a chance to discuss interesting applications of Palisade software in detail.

As always, the Risk Conference events are invaluable opportunities for networking and learning. "As an introduction to the software, I thought this conference was eye-opening. As I get more familiar with the software, I can see future conferences being valuable in honing my skills and learning new tricks and different perspectives on using the software," said Cory Forgrave, Economic Analyst in the DOI Division of Energy and Mineral Development. See more quotes from participants below.

 

Keynote focuses on successful BorgWarner
project with Palisade Custom Development

Brian Maturi, Director of Risk Management at BorgWarner, delivered the keynote address. Mr. Maturi described the successful implementation of a capital appropriations model that is used by around 300 financial analysts, controllers and program managers in 17 countries around the world.

Maturi and BorgWarner worked with Palisade’s Custom Development team to incorporate @RISK functionality into their model so that non-expert users could easily input data, and obtain standardized reports for business managers. The users of the system are not statisticians, so the model needs to be powerful, yet simple. “We wanted a system that could model 90% of the risks rather than an overly complex system that tries to model everything,” said Maturi. Palisade developers were able to take his instructions and build a flexible model with the user interface he was looking for.

Explains Maturi, “We have educated about 2,000 managers over the years in how to interpret the @RISK outputs, and more importantly, how they can use the information to design business strategies to manage, mitigate and even exploit the risks using real options thinking.”

“We are with Palisade for the long haul,” adds Maturi. “My company is very, very good at engineering leading edge automotive products. Palisade is very, very good at building risk based models.”

» View Brian Maturi’s keynote presentation
» View presentations from the 2013 Palisade Risk Conference in Las Vegas

 

A Global Series

The 2013 Risk Conference series took place in over a dozen cities covering 6 continents, and brought together hundreds of risk analysis professionals. We have announced dates for the EMEA region for 2014, with more dates coming soon. We hope you will be able to join us.

» 2014 Conference dates

Chris Albright presenting  at 2013 Palisade Risk Conference in Las Vegas

» See more photos from the 2013 Vegas Risk Conference

 


Quotes from the 2013 Las Vegas event

"Very good conference with good usage of time."
— Mark Mendonca, Program Risk Management, Ernst & Young

"Excellent opportunity to explore all aspects  of risk analytics!"
— Kurt Carson, Senior Quant Analyst  in ERM group, Chelan PUD

"Excellent conference. Very informative.  Great topics."
— Laurie Rutherford, Director, Enterprise Risk Management at CenterPoint Energy

"Great conference!"
— Matt Rosenberg, RoseCap Investment Advisors

"A valuable and educative experience."
— Richard Horsfall, Consultant

"Excellent learning and networking opportunity."
— Mike Wallace, Consultant

 “As an introduction to the software, I thought this conference was eye-opening. As I get more familiar with the software, I can see future conferences being valuable in honing my skills and learning new tricks and different perspectives on using the software.”

Cory Forgrave, Economic Analyst in the DOI Division of Energy and Mineral Development

 

 

 

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Minimising Financial Risk in Infrastructure PPP Projects

Recent practice in Private Public Partnership (PPP) transport projects has seen the participating governments and public agencies gradually moving from demand-based contracts to availability-based ones. These latter agreements see the public partner bear the financial implications of actual demand being either over or under that forecast, while risks associated with construction and service availability are transferred to the private partner fulfilling the contract.

Civil engineering consultancy Solvĕre has developed a methodology to enable the partners involved in PPP infrastructure projects to minimise their financial risks by accounting for each element of the project that can affect its financial status and therefore profitability. To do this Solvĕre uses @RISK to estimate the performance and to forecast the potential deductions in the payment mechanism for each project. (How much and at what intervals the government pays the contractor is determined by the ‘payment mechanism’. This relates to the quality of the service provided by the private partner whose revenue is therefore dependent on its performance score and the incentive or penalty rules of the contract).

The key objective is to quantify, for various levels of probability, the economic impact of the performance criteria not being met. Solvĕre’s @RISK model takes into account the contract specifications and the resources committed by the operator to complete the project and undertake maintenance of the infrastructure, combining them in order to evaluate the expected level of performance on this base scenario.



Solvĕre believes that the highly-complex nature of PPP contracts, coupled with payment mechanisms being subject to a significant degree of uncertainty, requires in-depth analysis in terms of probability and risk. Using @RISK, it has developed a way to do this, thereby enabling informed decisions regarding the feasibility of the project and a proper risk allocation between the partners.

» Read more about Solvĕre's use of @RISK

 

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Free Webcast this Thursday: "Exploring Oil & Gas Applications of @RISK and the DecisionTools Suite"

Register now for a free webcast to be presented by Rafael Hartke, Palisade's Oil and Energy Industry Consultant. "Exploring Oil and Gas Applications of @RISK and the DecisionTools Suite: Examples from Petrobras and Others" will demonstrate how the DecisionTools Suite can be used in oil and gas exploration, production, and project decisions.

JOIN US THIS THURSDAY - December 19, 2013 - 11:00am ESTRegister Now
"Exploring Oil and Gas Applications of
@RISK and the DecisionTools Suite:
Examples from Petrobras and Others"

For decades, @RISK has helped engineers and finance managers estimate unknown reserves, value new projects against each other, and craft optimal strategies. PrecisionTree, another tool in the DecisionTools Suite, is commonly used for drilling strategy discussions, production siting problems, and other multi-stage, sequential decisions. RISKOptimizer comes into play when companies need to determine the best “mix” of projects in their portfolio in order to maximize overall returns.

For many years, Rafael Hartke solved these types of problems at Petrobras, the state oil company of Brazil and one of the world’s largest producers. In this free live webcast, he will draw on his experiences to demonstrate how @RISK and the DecisionTools Suite can be applied to common types of issues faced by oil and gas producers, such as: estimation of unknown reserves, analysis of multi-play concessions, structure of complex partnership agreements, optimization of uncertain project portfolios, and more.

Rafael Hartke is also a contributing writer for Oil & Gas Monitor. Here are a few of his previous articles:

 

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Join us NEXT WEEK in Las Vegas for our last event of our 2013 Palisade Risk Conference Series!

 

Join leaders from CH2M Hill, Intel, BorgWarner, Blue Cross, and More!
Mandalay Bay Resort and Casino, November 20-21, 2013

It’s not too late -- contact us now if you are interested in attending next week’s event in Las Vegas!

The Palisade Risk Conference offers four tracks of learning over two days, plus the chance to set up individual free Expert Sessions with our consultants to review your own risk models.

Industry experts will present a selection of real-world case studies about innovative approaches to managing risk and uncertainty in a wide range of business applications. Here’s just a sample:

The event will also include practical software workshops and training classes presented by Palisade trainers, consultants, and software engineers. We’ll explore exciting new features in @RISK and DecisionTools Suite software that make risk modeling and analysis more accessible – and powerful – than ever.

“Great conference and very useful for a new user like myself. This saved me a lot of time in climbing the learning curve.”
          - Jeff Passmore, Senior Liability Strategist
            Standish/BNY Mellon

“We saw and discussed methods that directly apply to our problems, and learned to build upon them to come up with solutions.”
          - Michael Watson, PMP, Senior Staff
            Integrated Planning, Lockheed Martin

 » View the conference schedule
 » Quantify the value of attendance for your company


 
Contact Palisade for a special registration rate:

 

 

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"Risk Analysis and Oil Production Curves" in 'Oil & Gas Monitor'

Oil & Gas Monitor

The use of risk analysis in the oil and gas industry can take many forms. Whether it’s safety risk, economic risk or schedule-based risk, it is critical to know what risk factors exist and the likelihood that they may occur. Doing so allows decision-makers to plan in a manner that will ensure the highest attainable rate of success.

In his most recent Oil & Gas Monitor article Risk Analysis and Oil Production Curves, Palisade's Oil and Energy Industry Consultant, Rafael Hartke, invites us to learn more about modeling oil production curves in face of uncertainty. He focuses on the production curve risk of a single oil well by exploring how risk factors affect the production curve and some common mistakes one should avoid when modeling production curves of oil projects. Read the full article to find out how deterministic models using most likely values or using expected values, compare to a probabilistic method using distribution functions and Monte Carlo simulation.

 

Risk Analysis and Oil Production Curves

 

In his next Oil & Gas Monitor article, Rafael will discuss what happens when dealing with the production curve of a group of wells and the statistical differences between a single well and a portfolio.

See also:

"Decision Trees and the Value of Flexibility II"  in Oil & Gas Monitor: Taking another look at "Bad" projects

"Application and Benefits of Risk Analysis for Decision Making in the Oil Industry" in Oil & Gas Monitor

"Practical Challenges of Implementing Risk Analysis in Oil Companies" in Oil & Gas Monitor

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Radio App gets Risk Analysis Solutions from Palisade

How will a new technology or venture fare in an unestablished  or unclear market? Palisade’s @RISK software can help answer that question, and did so for the new mobile app called Omny by 121Cast, which allows users to manage their online listening of internet radio and other audio services for total customization.

The app, a venture under the stewardship of the Australian venture capital firm Adventure Capital, was used as an study example by researchers Dr Clint Steele and Kourosh Dini of Australia’s Swinburne University of Technology , and Darcy Naunton of Adventure Capital to test @RISK’s capability of resolving business model uncertainties.

Some of the unknowns of the app’s business plan included market size, speed of adoption, resources needed to develop the application and related services for market segments, optimum pricing, effectiveness of promotions, and size of the organic market. Identifying the sources of potential randomness was just the start. The model needs to be set up in such a way that when random fluctuations in the inputs occur, they have the correct effect upon the outputs. Unfortunately, many business plans and their financial models are not usually put together in such a way. Often, fixed numbers that “seem right” to the entrepreneur are allocated to each cell within a spreadsheet. The model will balance, but if one changes a cell value for, say, the market size, then the other cells are unlike to change much. If they do, then it will unlikely be in a logical manner. An increase in sales, for example, may not cause a corresponding increase in operations costs, asset purchased, or administration costs.

Creating accurate models for these relationships was the first step. This was easy for the typical issues. The relationship between market size and the cost of customer support is a good example. However, other relationships are trickier to model. For instance, how does an increase in sales affect the position of an app in an app store listing? To figure this out, the team used @RISK to create a model with distributions specified by percentiles. @RISK also helped the entrepreneurs use ‘coevolution’ to design a business plan--coevolution occurs when a problem becomes clearer after a person engages in solving it. “Because you have to create a model that allows for the flow of variances, a lot more thought needs to go into how the proposed business will run,” says Darcy Naunton, the capital venture manager on the project. “I now know a lot more about this business than I ever would have otherwise.”

As the case study explains, new ventures will always have unknowns. “It is what entrepreneurs do – deal with uncertainty. However, @RISK can be used to eliminate uncertainty about the sensitivity of the business model to expected randomness. This is different from removing uncertainty, or randomness, entirely – that’s impossible. But by mitigating some of the guesswork around the sensitivity of a business plan to various external fluctuations, an entrepreneur can now focus uncertainty management skills on a smaller area and apply those skills more intensely.”

Read the original case study here.

See also: Incorporating Project Risk Management Strategies in your Enterprise

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Hitachi taps Palisade RDK Software to help manage Supply Planning

Hot off the heels of recent success in China, Palisade continues to establish a reputation for excellence in Eastern markets—this time in Japan. Hitachi Solutions East Japan, Ltd., a core IT company of the Hitachi Group, which employs some 400,000 people worldwide, has selected Palisade’s @RISK Developer Kit to help manage supply planning. 

With its headquarters in Sendai City in Miyagi Prefecture, Hitachi Solutions East Japan Ltd. is responsible for data and risk analysis of supply chain management, production, and sales & inventory planning and management. Analyzing these elements can be tricky, particularly when it requires forecasting demand and prices of raw materials. Using the @RISK Developer kit, Planning Department Research Division Head Masaru Tezuka and his team were  able to do these analyses.

There are a wide variety of risks in the manufacturing industry, including fluctuating variables such as demand, price, and foreign exchange. For demand fluctuation, supply is determined by demand forecasts. If the forecast underestimates demand, a supply shortage results, causing the company to miss opportunities to increase sales. If the forecast overestimates demand, inventory or disposal costs may follow. Price and currency fluctuations are also important factors for risk management in the manufacturing sector, and the improvement of forecast accuracy through risk analysis is essential to mitigate these risks.

For these problems, Hitachi wanted to develop a high level stand-alone GUI (graphical user interface) to visualize production and inventory conditions, while also incorporating @RISK’s excellent risk analysis functions. @RISK’s Developer Kit made it easy to tailor the program to Hitachi’s needs and desires. Through the use of tornado diagrams, Hitachi was able to understand the effects on profitability based on which product is produced or sold at what time, and observe the overall situation for each product.

In his case study for Palisade, Dr. Tezuka concludes, “It is crucial to develop strong risk forecasting and risk analysis…@RISK is a critical part of that process.”

Read the case study here.
 

See also: Palisade's Risk Analysis Solutions at Work in China

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