Discounted Cash Flow Analysis

The current version of @RISK and the DecisionTools Suite, version 6.1, has now been fully translated into Spanish, Portuguese, French, German, Japanese, and Chinese. The user interface, example models, video tutorials, and complete help files and user manuals have all been carefully translated. Users can specify the language at install, and even change languages later -- all from the same installer. This is a major benefit to multinational companies seeking to roll out a single risk analysis standard around the world.

@RISK and DecisionTools Suite Maintenance Update

In addition to the language translations, a maintenance update to @RISK and DecisionTools Suite software has been released, version 6.1.2.

Rafael Hartke's column in the April issue of Oil & Gas Monitor covers "Application and Benefits of Risk Analysis for Decision Making in the Oil Industry."

"Contrary to what may seem obvious on the surface, the driving force behind risk analysis is not statistics, simulation or intricate mathematical models – it is actually much simpler than that. To put it in basic terms, risk analysis is the acknowledgement that there is uncertainty over the assumptions of the project. Statistics and simulation are only tools that help model this uncertainty, and only when we recognize uncertainty over the assumptions of a project can we begin to consider appropriate actions and mitigation strategies."

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

Rafael Hartke is an Oil and Energy Industry Consultant at Palisade Corporation, where he assists in the development and strategy of quantitative risk analysis methods geared towards the energy industry. He also served as a Financial Engineer in Risk Management at Brazilian-based energy corporation, Petrobras, where he created risk models for complex investment projects and assessed project risks for medium and large projects, including Brazilian Pre-Salt giant fields, projects in the Gulf of Mexico, and offshore infrastructure projects. Palisade Corporation is the provider of the world’s leading risk and decision analysis software, @RISK and the DecisionTools Suite.

What’s New
Engineering Giant AECOM Employs @RISK in Key Climate Change Study for Australian Government

With flooding an increasing threat to coastal residents north of Sydney, Australia, @RISK software was employed by engineering firm AECOM to model the risks and benefits of various preventative measures. AECOM was engaged by the Australian Department of Climate Change to undertake an economic analysis of climate change impacts on infrastructure through the development of a series of case studies. These studies will be used to inform the Australian government’s discussion on policy responses to the risk that climate change will increase infrastructure investment and maintenance costs. In this case, the area of study was the increased risk of flooding from Narrabeen Lagoon in the northern Sydney local government area of Pittwater. Read more.

» Scientific Computing World Highlights Role of Palisade Tools in
   Innovative New MRI Procedure
» Palisade Risk Conference Las Vegas Call for Papers

Case Study
» Energy Company Relies on @RISK to Lower Drilling Costs

@RISK Modeling Tips
» Supply Chain Disruptions

Upcoming Webcasts

Worldwide Training Schedule
 

Palisade February 2013 Academic Enews
In This Issue

» Pepperdine’s Graziadio School of Business Leverages Palisade
   DecisionTools Software to Teach Students the “Why” Behind
   Decision Analysis

"Using [DecisionTools] software applications allows me to focus on teaching problem solving (what analysis to run, what assumptions to make, what inputs to use, and how to interpret the results), rather than the computational aspects, which would otherwise take up most of the class time. This is especially important in the fast-paced half-semester courses we now use."
     Dr. Joe Hahn, Pepperdine University

» Recent School Adoptions

» Licensing Options

» Teaching Tips & Examples
   Tollgates and Bank Tellers

» Tech Tip
   Artist Command

» Textbook of the Month
   Principles of Risk Analysis: Decision Making Under Uncertainty

» Featured White Paper
   Examination of Pig Farm Technology by Computer Simulation

» Academic Live Webcasts
   • @RISK for Engineers
   • The use of @RISK with an Online Investment Portal

» Worldwide Training Schedule

» About Palisade and the DecisionTools Suite

» Story to Share?

 

• What will be the effect of a new health policy in a country?
• How do we quantify and mitigate health risks in our food supply?
• Should we allow imports of a certain agricultural product?

Quantitative risk analysis techniques can help you answer these and many more questions. A new postgraduate certificate program in Risk Analysis in Health and Food Safety is being offered by EpiX Analytics and the Royal Veterinary College (RVC), University of London. “People interested in risk analysis in health and food safety come from a variety of backgrounds, so it was important for us to use software that is not only statistically sound, but also user friendly. This is why we chose @RISK as the primary teaching software for this course,” said Dr. Francisco Zagmutt, managing partner of EpiX Analytics and one of the course instructors.

This course will use many examples and case studies to provide participants with the skills for cutting-edge quantitative risk analysis in health and food safety. The course is designed to accommodate the work schedules of professionals from research institutions, governmental and international agencies; agricultural, food, pharmaceutical and related industry; and academic staff and post graduate students.

 » More information and to register
 » Case study about @RISK and the Royal Veterinary College
 » "Good Practices and Common Mistakes" webcast delivered by Dr. Huybert Groenendaal of EpiX Analytics

What’s New
» PwC Advocates “Corridor Budgeting” to Deal with Uncertainties Head On
» New Postgraduate Certificate in Risk Analysis in Health and Food Safety at the Royal Veterinary College of the University of London
» Palisade Featured in Healthcare ExecutiveInsight
» Save the Date: 2013 Palisade Risk Conference Las Vegas – November 20-21

Case Study
» @RISK Used to Model Blood Screening Safety

@RISK Modeling Tips
» Using @RISK to Estimate Oil and Gas Reserves

Upcoming Webcasts

Worldwide Training Schedule
 

Palisade January 2013 Academic Enews
In This Issue

» Illinois State's MBA Corporate Finance uses @RISK for Advanced Techniques

"Just like Excel itself, @RISK does its work without involving you in its computational complexities. So students who may have been scared of stats and data analysis before can feel perfectly at ease creating their simulations—and so, they want to do more."
     Dr. Domingo Castelo Joaquin, College of Business, Illinois State University

» Recent School Adoptions

» Licensing Options

» Teaching Tips & Examples
   Hedging with Futures

» Tech Tip
   RiskCollect

» Textbook of the Month
   Statistics for Business and Economics

» Featured White Paper
   A participatory approach for integrating risk assessment into rural decision-making

» Academic Live Webcasts
   • Portfolio Management using @RISK
   • @RISK for Engineers

» Worldwide Training Schedule

» About Palisade and the DecisionTools Suite

» Story to Share?

 

PricewaterhouseCoopers put together a beautiful video about the Corridor Budgeting program, developed by Tobias Flath and Michael Hofmann. Corridor Budgeting is a methodology combining planning, business management, and risk management in order to prepare for a range of possible outcomes, and thereby generate a more realistic picture of the future.

Palisade's DecisionTools Suite is an integral part of this program. As explained in the video: "We identify the factors underlying variables and ranges that impact on financial results. The Corridor is regularly analyzed and validated, giving visibility into any gaps or delta between target bandwidths and actual figures. Specially designed software then aggregates these bandwidths and event risks to paint an accurate picture of possible scenarios."

The video depicts modeling with Monte Carlo simulation: "A simulation models the total risk exposure. The width of the curve indicates the level of uncertainty. The height shows the likelihood that an event will occur, giving senior executives insights into the full spectrum of future possibilities, and making it easier to make the right decisions."

The video concludes, "Corridor Budgeting allows businesses to forecast more realistically, and prepare more effectively for what's to come, equipping them to face the future, however it turns out." It's a simple and beautiful explanation of how risk and decision analysis are a central part of business decisions today.

See PwC's Corridor Budgeting video here:

We all know the figure of speech, "A camel is a horse designed by committee." The blog How to Manage a Camel promotes better group thinking around project management, bringing together conflicting opinions.

On January 7th, the Camel blog published "Nine Steps to Embracing Risk Analysis in the Enterprise" by Palisade's Randy Heffernan. This piece looks at some of the key advantages of implementing risk analysis in a holistic manner with an organization. It also gives guidelines for implementing a project risk management strategy within your enterprise.

A brief excerpt: "Increased use of risk analysis in the form of quantitative risk management (QRM) and decision-making under uncertainty (DMUU) is helping organisations to be prepared for unforeseen risk. Simply put, QRM and DMUU mean thinking more quantitatively, with numbers and probabilities. It means recognising that uncertainty exists in nearly every decision, and accounting for it in a quantitative way. One good example of this is the use of Monte Carlo simulation, which is an analytical technique that evaluates and measures the risk associated with any given venture or project. A computerised mathematical process, it allows users to define uncertain variables in their models and see, as a result, a range of possible outcomes and the probability that each will occur."

» Read the complete article here

Palisade's 2013 regional training schedule already includes over 80 locations around the world. Take the opportunity for hands-on training in Decision Making and Quantitative Risk Analysis when our expert trainers come to your town.

» See the worldwide regional training schedule here.

2013 locations include:

• Mexico City
• Medellin
• Buenos Aires
• Melbourne
• Bangkok
• Tokyo
• Hong Kong
• Johannesburg
• Abu Dhabi
• Paris
• London
• Munich
• Oslo
• Brussels
• San Diego
• Houston
• Washington, DC
• Montreal
• Chicago
• and many other cities around the world

Palisade also offers Live Web Training so that you can learn from the comfort of your desk, and On-Site Training tailored to your organization's needs.

We invite you to use our many complimentary learning resources, including Free Webcasts and online Quick Start videos, Guided Tours, Experts' Corner, and Example Model videos.

Join us this Thursday, January 10, 2012, for a free live webcast entitled, "Use of @RISK in Food Safety Risk Assessment " to be presented by Charles Yoe.

The Food Safety Modernization Act is the most sweeping reform of FDA’s food safety authority in more than 70 years. It strengthens and increases the role of risk analysis in protecting consumers and promoting public health. In this free live webcast, Prof. Charles Yoe of Notre Dame of Maryland University will use the FDA/ Center for Food Safety and Applied Nutrition’s report “Quantitative Risk Assessment on the Public Health Impact of Pathogenic Vibrio parahaemolyticus In Raw Oysters” in a demonstration and discussion of the use of @RISK in food safety risk assessment.

Charles Yoe is a professor of economics at Notre Dame of Maryland University and an independent risk analysis consultant and trainer. Working extensively for U.S. and other government agencies as a consultant and risk analyst, his wide range of risk experience includes international trade, food safety, natural disasters, public works, homeland security, ecosystem restoration, resource development, navigation, planning, and water resources. As a consultant to private industry his work includes a discrete but wide variety of concerns. He has trained professionals from over 100 countries in risk analysis and has conducted customized risk training programs for government agencies and private industry in over two dozen nations.

» Register now (FREE)
» View archived webcasts

In a recent issue of Supply Chain Digital magazine, Palisade's Randy Heffernan explored the relevancy of risk analysis solutions for supply chains. 

"Managers need to be able to answer questions like: 'What is the probability this critical part will arrive on time?' and 'What are the chances of failure at this point in the process?'" says Heffernan. "[Risk analysis techniques using Monte Carlo simulation] allow decision makers to perform trade-off analysis among expected costs, quality acceptance levels, and on-time delivery distributions. It also provides alternative tools to evaluate and improve supplier selection decisions in an uncertain supply chain environment."

Supply Chain Digital covers the global supply chain space, from how parts are sourced to how packages arrive on your doorstep. It is a leading source of logistics, procurement, warehousing and outsourcing news geared toward executives in the supply chain industry around the world.

» Read the complete article: "Risk Analysis Will Drive Better Decsions Across the Supply Chain"

The December issue of Executive Insight magazine features an article by Palisade's Randy Heffernan, entitled "Using Technology to Navigate Risk."

Executive Insight serves C-level executives in the healthcare field, focusing on the latest strategies, protocols and products.

Heffernan's article explores the benefits of risk analysis technology for healthcare organizations.

"How can healthcare organizations accurately assess risk?" asks Heffernan. "For many healthcare providers, risk analysis technology, which utilizes a computational method called Monte Carlo simulation, has proven to be a valuable asset in understanding risk factors and making crucial decisions that address real-world healthcare concerns, such as determining optimal staffing, patient capacity and facility expansion."

Several applications of risk analysis technology for healthcare are explored, including avoiding staffing shortages, patient capacity projections, and facility expansion.

» Read the complete article: "Using Technology to Navigate Risk"

It’s estimated that the human population will be nine billion by 2030. The Food and Agriculture Organisation believes that aquaculture, which currently provides around half of the fish and shellfish eaten around the world, is the only agricultural industry with the potential to meet the protein requirements of this size of population.  

However, one of the biggest constraints to achieving this is the depletion of stock levels through disease. Biosecurity measures, which aim to prevent, control and ideally eradicate disease are regarded as essential. However, encouraging the adoption of these practices are often difficult due to aquatic farmers’ levels of education, training, responsibility and perceived economic benefits. In addition, global estimates of disease losses may appear remote and irrelevant to farmers and producers.

Having seen Palisade’s risk analysis tool @RISK being demonstrated, Dr Chris Walster, a qualified veterinary surgeon and the secretary of the World Aquatic Veterinary Medical Association (WAVMA), started using the program to calculate the realistic risk of aquatic disease to farms, with a focus on cases where data inputs were limited. The capacity of @RISK to present data in an easy to understand way meant farmers could more easily understand the disease risk probabilities, review the cost/benefit of disease prevention and make informed choices about whether to put controls in place.

“@RISK enables farmers to reduce the risk of disease spreading amongst their animals whilst minimising additional costs,” Dr Walster explains. “For aquatic vets, the key is the graphs which allow us to demonstrate a complex probability problem quickly and simply in a way that is easy to understand and trust. These inform decision-making, thereby helping to boost the world’s aquatic stock whilst safeguarding farmers’ livelihoods.”

“This technique also potentially offers an economical method of assisting in the control of many diseases. Farmers undertake their own tests, with each of these providing incremental inputs so that the macro picture can be developed and acted upon,” concludes Walster.

» Dr. Walster's PPT presentation:
   @RISK's Role in Biosecurity: Reducing Disease Risk when Data is Limited

» Case Study: Reducing the risk of disease in aquatic animals using @RISK from Palisade

Join us this Thursday, December 6, 2012, for a free live webcast entitled, "Good Practices and Common Mistakes" to be presented by Dr. Huybert Groenendaal. This was one of the favorite sessions last month at the Palisade Risk Conference in Las Vegas.

Ever question if your Monte Carlo model is correct? Ever wondered how other organizations use @RISK, how to get the most value out of @RISK, and what are some of the most important best practices? Then this is the right free live webcast for you!

An increasing number of organizations are using analytical techniques such as quantitative risk analysis, value at risk (VaR), and risked NPV to help them improve decision making. However, all too often, these techniques may not be used optimally or accurately and their full value may not be realized.

During this presentation, Dr. Huybert Groenendaal will share his hands-on experience through hundreds of projects, and will discuss the following topics:

1. Good practices for the use of @RISK and risk modeling to support decision-making
2. Common mistakes in Monte Carlo simulation and how to prevent them.

All good practices and common mistakes will be discussed with the use of real-life risk modeling case studies and models based on EpiX consulting work.

Dr. Huybert Groenendaal is a managing partner at EpiX Analytics, a consultancy that helps clients use Monte Carlo simulation and probabilistic modeling in a broad range of industries and fields, ranging from financial risk analysis, business development, marketing, budgeting, inventory optimization, and pricing, to risk analysis in health. Dr. Groenendaal has extensive experience in risk modeling and analysis for business development, financial valuation, R&D portfolios and portfolio evaluations in pharmaceuticals and medical devices. Dr. Groenendaal also teaches a variety of risk analysis training courses including Financial Risk Modeling for Pharmaceuticals, Quantitative Risk Analysis, and Corporate Finance Risk Analysis and customized on-site courses. He also lectures on the use of risks modeling in business at the executive MBA program at the Leeds School of Business, University of Colorado and teaches two online risk analysis courses at Statistics.com. Dr. Groenendaal has an MBA in Finance from the Wharton School of Business and PhD from Wageningen University and is an adjunct faculty at Colorado State University.

» View the recorded webcast "Good Practices and Common Mistakes"
» View webcast archive

All DecisionTools Suite products now include revised and updated example files, as well as all-new examples in a range of industries.  All examples are clearly organized and easy to navigate. These examples have been designed and written by leading MBA professor and author Dr. Chris Albright of Indiana University. They provide step-by-step guidance on setting up and running models to address a wide range of industry applications. In addition, many examples offer short, built-in videos that walk you through the model.

Furthermore, new video tutorials have been developed by Dr. Albright to help new users get started quickly, and to help experienced users get more out of the software.

Quick Start models files and videos
These short, interactive tutorials are designed to teach you how to use DecisionTools software by walking you through an actual model – all under 30 minutes! Build a model step by step, following the simple video instructions provided.

Guided Tour Videos
Guided Tours explain the functionality of each part of the software ribbon in detail. Learn how the features work, improve your efficiency, and avoid errors in your models.

Example Videos
Follow along as experts demonstrate the powerful analytical features of the DecisionTools Suite, and then open the actual risk and decision analysis models. Models are available here, and linked directly from your software.

» Palisade Videos

@RISK (risk analysis software using Monte Carlo simulation) is now a truly cross-platform tool, enabling risk modeling of your Microsoft Project schedules using the same @RISK you use for risk analysis modeling in Microsoft Excel!  You can now do your project risk modeling in Excel rather than Microsoft Project, providing a new world of flexibility. A new interface layer reproduces your schedule in Excel, enabling you to use all Excel formulas and @RISK functions. When you make changes to your model in either Project or Excel, those changes are reflected in the other with @RISK’s Sync feature. (Note that all @RISK modeling takes place in Excel, so @RISK functions do not appear in Microsoft Project.) Then simulate your Project schedules in Project itself, using Project's scheduling and calculation engine.

The benefits of using Excel for your Project risk modeling are many.  You can easily build risk registers in Excel for your Project model using new “RiskProject” functions.  You can integrate your cost and schedule analyses. You can standardize on a single tool – @RISK – to meet the needs of your project managers, cost estimators, finance analysts – everyone who deals with risk and decision making under uncertainty in your company. Plus, a single interface means a shorter learning curve for everybody.

@RISK is part of The DecisionTools Suite -- an integrated set of programs for risk analysis and decision making under uncertainty that runs in Microsoft Excel.

» Watch a demonstration of project risk modeling with @RISK
» See What's New in the DecisionTools Suite 6

@RISK now offers a new set of functions for simulating time series processes, or values that change over time. Any future projection of time series values has inherent uncertainty, and @RISK now lets you account for that uncertainty by looking at the whole range of possible time series projections in your model. This is particularly useful in financial risk analysis modeling and portfolio simulation.

There are functions available for 17 different statistical time series models, including ARMA, GBM, GARCH, and others. These functions are entered as array functions in Microsoft Excel.

@RISK provides new windows for fitting historical time series data to these new functions. The results can be animated to show the behavior of your time series during simulation. All this is integrated into the existing @RISK interface.

@RISK is part of The DecisionTools Suite -- an integrated set of programs for risk analysis and decision making under uncertainty that runs in Microsoft Excel.

» Watch a demonstration of this new feature
» See What's New in the DecisionTools Suite 6

Like the inner workings of an intricate timepiece, major projects are made up of a number of parts—often moving in different directions—that must all work in concert to keep accurate time. The functioning interconnectivity of the smaller projects is greatly impacted by an organization’s ability to accurately forecast the risk, both major and detailed.  For management consulting firm Value Management Strategies (VMS),  Monte Carlo simulation has proven to be an effective method of risk management for many multi-level projects.

Value Management Strategies, Inc., based in Escondido, Ca. is a management consulting firm specializing in value analysis, value engineering and risk management for organizations in both the public and private sectors. VMS clients include state and federal government agencies, private engineering and architectural firms and local and international manufacturing firms.

Many of VMS’ clients are looking to deliver projects, implement processes or produce innovative products in specific verticals. To successfully complete these projects, they turn to VMS to analyze the seemingly never-ending maze of uncertainty and risk that exists in various projects and to develop risk response strategies and action plans that maximize opportunities and minimize threats. In this capacity, the VMS’ utilization of Monte Carlo simulation through @RISK helps to support the decision-making process, as well as offer a more granular understanding of the nature of uncertainties being characterized. Clarity of the likelihood and exposures of risks can help to minimize delays and maximize efficient deployment of capital resources.

We’re excited that @RISK is able to help VMS to keep its clients “moving parts” moving in the right direction.  Time is money…tick-tock, tick-tock.

» Read more: VMS Utilizes @RISK to Offer Clients a Roadmap to Managing Risk on Projects and Programs