@RISK and DecisionTools Suite 6.2 Now Available

Offers Improvements to Excel Developer Kit Automation, Russian Translation

New version 6.2 of @RISK and the DecisionTools Suite is now shipping.

Version 6.2 offers a variety of improvements and now is localized for Russian, in addition to the previously available English, Chinese, French, German, Japanese, Portuguese, and Spanish.

Get Your Upgrade
If you have a current maintenance plan, you can upgrade at no charge on our website.

     » Upgrade now with maintenance

If you do not have current maintenance or aren’t sure, contact Palisade.

New XDK Functionality and Documentation
@RISK, PrecisionTree, Evolver, StatTools, and NeuralTools offer an Excel Developer’s Kit (XDK), which allows you to automate and customize the tool within Excel using Excel’s built-in VBA programming language. The XDK for @RISK has been updated to include new functionality for the automation of @RISK graphs and simulation filters, as well as several additional improvements.

For most products, the XDK now includes a new “Automation Guide” to help you get started quickly. In addition, new videos and example files have been added to all XDKs to help you use this powerful feature.

     » See XDK videos

Improved Simulation Startup Time for Project Models
The time required to initialize a simulation of models from Microsoft Project has been dramatically reduced for most cases. The improvement is most significant in models with many tasks.

Russian Translation
All products have also been translated into Russian. This is in addition to the other languages available for the DecisionTools Suite: Spanish, Portuguese, German, French, Chinese, Japanese, and English.

Other Enhancements
Version 6.2 also includes maintenance fixes and improved messaging for software updates. In addition, the @RISK graphics engine now has the ability to display graphs using logarithmically scaled axes.


NASA & Deloitte develop Monte Carlo Simulation tools for space projects, and apply them to Oil & Gas

What do NASA, Deloitte and the oil and gas industry have in common? As of this year, a great deal. In June, the NASA Johnson Space Center and the Deloitte Center for Energy Solutions announced a strategic alliance to offer a wide array of risk management services for the oil and gas sector. Under the agreement, Deloitte will utilize NASA as a subcontractor for oil and gas risk management projects.

From the outside looking in, the alliance may seem a bit curious. Deloitte has a long history of assessing risk for enterprise, but how, exactly, does space exploration synch up with oil and gas? The clearest and most relevant commonality between the two is low-probability, high-impact risk events (also referred to as “black swan” events). An inaccurate risk forecast may result in delays and loss of capital for most industries. Not to downplay these losses, but they are material in nature. The same can’t be said for space exploration and energy, where miscalculations of risk can be, quite literally, disastrous. Given that backdrop, NASA has a lot to offer in terms of methods for assessing risk factors and the probability that they may occur.

Monte Carlo simulation (MCS) is a computerized mathematical technique utilized by both oil and gas and space exploration to not only determine potential risk factors, but project the probability that such risks may actually occur. For example, NASA utilized MCS to run a series of simulations in the development of Orion, the space vehicle that will replace the Space Shuttle, which uncovered general fight dynamics problems. The MCS capabilities of Palisade's @RISK have been invaluable in this field.

The utilization of Monte Carlo simulation has also played a prominent role in the oil and gas industry. Blade Energy in Frisco, TX. developed a statistical analysis tool using MCS from @RISK called “Under Balanced Drilling Productivity Improvement Estimator” to  estimate productivity improvements for underbalanced drilling. @RISK's MCS was also utilized by the Brazilian Oil company, Petrobras to develop risk projections related to the production of oil and natural gas, demand for derivatives, prices of various commodities, start dates for various operations and changes in company capital and operating expenditures.

The alliance between NASA and Deloitte is expected to assist oil and gas companies to address low-probability, high-impact events that may occur during field activities such as deep-water drilling, undersea production, and pipeline operations. Deloitte will also offer examinations of the “risk culture” that exists among an organization’s employers and contractors to determine the likelihood of risk in work environments and processes.

See related:

Petrobras Uses @RISK for E&P Analysis

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


Free Webcast this Thursday: "Energy Risk Modeling as a Teaching Tool, and Overview of the Book" with Roy Nersesian

Register now for a free webinar to be presented by risk modeling expert Roy Nersesian.

"Energy Risk Modeling as a Teaching Tool, and Overview of the Book"

Free webcast this Thursday, 19 September 2013
11am EDT

Energy Risk Modeling is a new book from Roy Nersesian for those looking for simulation, decision trees, and optimization techniques for energy applications.

Much of Energy Risk Modeling is a result of Professor Nersesian’s course Energy Modeling at School of International and Public Affairs (SIPA) at Columbia University.

In this free live webcast, the presentation will be on how he utilized the contents of his book to build a course. His presentation will also be an overview of the book for individuals in the field of energy who may want to utilize @RISK products in their work.

The book has been written in a way to spur ideas on how @RISK products can be used in various aspects of energy from fossil fuels to renewables. At the end of his presentation, he will address matters on the minds of attendees on how @RISK may be applied to their work.

» Register now for the free webcast "Energy Risk Modeling as a Teaching Tool, and Overview of the Book"

About the Presenter

Roy Nersesian is a professor at the Leon Hess School of Business at Monmouth University and an adjunct professor at the School of International and Public Affairs at Columbia University. Professor Nersesian holds a BS in physics from Rensselaer Polytechnic Institute and a MBA from Harvard Business School. His time is committed to education and writing. In addition to Energy Risk Modeling, he has also written for Palisade @RISK Bank Credit and Financial Analysis, Evolver Solutions for Business, and RISKOptimizer for Business Applications. He has written several books among them the 2nd edition of Energy in the 21st Century published by M. E. Sharpe in 2010. He is currently under contract with M.E. Sharpe to write a book on energy and economics.

» View the complete webcast schedule, and see past presentations in the Archive


Finding the Weakest Link: Joseph Yacura Discusses Supply Chain Risk Management

Businesses around the world rely on supply chains to create, manage and distribute goods and services. Most of these supply chains reach beyond local borders and operate in a globalized environment which prioritizes cost-competitive production. To achieve these cost targets, companies have taken out all unnecessary capacity and inventory within the whole supply chain to maximum revenue. As a result, if anything goes wrong in just one link of these chains, entire businesses can stall. For most companies, these supply chains are at considerable risk of getting bogged down due to threats such as natural disasters, criminal activities, and cyber-attacks.
Joseph Yacura, a supply chain expert and consultant at ISG-ONE recently discussed how to manage potential risks facing supply chain operations in a video report released last month (see video below). According to Yacura, supply chains and supply chain risk management are becoming “a critical function of almost every company in the world.” 
Yacura explained that in certain regulated industries such as financial services, insurance, healthcare and others, new regulatory requirements have been implemented. These regulations require that suppliers be monitored and managed. Failure to do some place the regulated business in serious exposure to significant financail penalties. This is an added risk for affected companies to manage.
According to the video, supply chain disruptions have become much more frequent, and their severity has increased “dramatically”.
To keep these increasingly complex and sophisticated supply chains secure moving forward, Yacura stated that companies must prioritize supply chain risk management, and recommended companies have a supply chain risk officer in place to deal with these issues.
Currently the best most companies can do is to monitor and react to supply chain disruptions that have already occurred. In the future, leading companies will use predictive modeling to anticipate risk and disruptions within their supply chain. Risk associations, that are shared between suppliers, will also be identified to mitigate future supply chain disruptions.

Risk Analysis Solutions at LEGO Pave the Way for Inventive New LEGO Toys

LEGO Group has always been a trendsetter in the toy industry, perhaps due to its ability to both take on, and manage, risk.  Earlier this year, we covered how LEGO Group uses Palisade's @RISK to help it manage much of the risk it faces. The software helped the company consolidate its risk portfolio via Monte Carlo Simulations--evaluating the possibility of threats such as competitor infringements, currency risk and vendor breakdowns.

By looking at the chances of worst-case scenarios and comparing them to the risk tolerance that the company has set itself, the company could determine if it was able to take more aggressive policies.

Thus far, LEGO Group has been doing some exciting new approaches to product development; including the LEGO Cuusoo project, which is essentially a LEGO-only Kickstarter website. Users submit ideas for new types of LEGO sets and gather supporters for the project. All projects with 10,000 supporters or more are reviewed quarterly by LEGO.  The authors of the ideas selected by the company to become a new LEGO product receive a 1% royalty of  the total net sales of the product. Successful Cuusoo products include LEGO Minecraft, a LEGO Mars Rover, and, the latest, a LEGO Back to the Future set.

With Palisade's @RISK as a key tool in the LEGO Group's Enterprise Risk Management framework, the company was able to make informed strategic decisions and grow LEGO Group's profits at an impressive rate.

See Also: @RISK from Palisade plays key role in LEGO’s Enterprise Risk Management strategy




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

Here is an example of a custom application written by Palisade Custom Development using @RISK's XDK in Excel. In this example, @RISK is used for cost risk analysis and estimation.  The application prompts the user for a three-point estimate for each cost item in the project as a way to recognize uncertainty in these cost elements.  A risk register is created using a simply colored grid interface.  Next, because in real life costs are seldom independent of each other, the user is able to set up correlations between related cost elements.  Finally, the user can define external risk events that will affect the total cost of the project. Automation takes the shape of an Excel add-in, which is shown to the user as a new Excel ribbon.



Custom Development in Excel

Palisade Custom Development has written applications for insurance, cost estimation, retirement planning, oil and gas prospecting, portfolio risk management, schedule-cost risk analysis and more – all utilizing @RISK technology in Excel. This means we can create risk analysis solutions for you using a range of powerful analytics, including Monte Carlo simulation, decision trees, statistics, neural networks, and optimization. In each case, the interface is customized to include only what the users need, hiding unused @RISK functionality and preventing user access to the underlying model logic. You can also automate processes like reporting, generating only the charts and data you want. The result is a tailored application ready to roll out to your workgroup. 

New XDK Functionality and Documentation in version 6.2

Excel Developer’s Kits (XDK) automatically come as part of the DecisionTools software which includes, @RISK, PrecisionTree, Evolver, StatTools, and NeuralTools. XDKs allow you to automate and customize the tool within Excel using Excel’s built-in VBA programming language. In @RISK 6.2, the XDK has been updated to include new functionality for the automation of @RISK graphs and simulation filters, as well as several additional improvements. For most  products, the XDK now includes a new “Automation Guide” to help you get started quickly. In addition, new videos and example files have been added to the XDKs to help you use this powerful feature.

» See XDK videos


Money-saving Meds: Researchers Use Pharmaceutical Risk Assessment to Determine New Drug's Cost-Cutting Benefits

In the April issue of the International Journal of Nephrology and Renovascular Disease, researchers from  the DaVita Clinical Research in Minneapolis, MN used Palisade's @RISK software to develop a cost-offset model that cuts costs for end-stage renal disease treatment using an innovative pharmacological treatment.
Currently, about 400,000 end-stage renal disease (ESRD) patients in the US undergo dialysis three or more times per week. The costs for these treatments are staggering—with 85% of patients relying on Medicare as the primary payer, the estimated amount spent on their care is $29 billion.
One of the major portions of this cost come from metabolic maintenance medications--the kidney is responsible for both regulating phosphorus levels and red blood cell production. But dialysis is unable to mimic these particular behaviors of a healthy kidney—thus, ESRD patients can suffer from significant anemia, as well as bone and mineral deregulation, resulting in calcium being deposited in arteries instead of bone, with associated increases in clinical events such as fractures and cardiovascular and cerebrovascular events. Thus, patients must use oral phosphate binders to decrease their serum phosphorus levels, and receive regular injections of epoetin alfa (an erythropoiesis-stimulating agent [ESA]) to stimulate red blood cell production, as well as intravenous (IV) iron. All told, oral and injectable medications account for more than half of outpatient dialysis expenses.
An experimental oral phosphate binder, ferric citrate, has been found to both manage serum phosphate levels and increase measures of iron and iron storage in the blood, indicating that this single drug may have multiple benefits: treatment as an oral phosphate binder medication and iron source in ESRD patients with anemia. Thus the authors of the study developed a budget impact model estimating the monthly cost associated with the use of ferric citrate in the treatment of hyperphosphatemia with the added benefit of treating iron deficiency associated with ESRD anemia, versus the cost of other currently available phosphate binders. The model was constructed from the perspective of a US managed care plan.
Monte Carlo simulations were used to address the high uncertainty of the cost-offset model parameters using @RISK. The simulation showed that for each patient with ESRD, a managed care organization, such as Medicare, will likely save between US$104 and US$184 (90% confidence interval) per month with ferric citrate use. These savings translated into a monthly savings of between US$52,164 and US$92,186 (90% confidence interval) per 500 ESRD patients when ferric citrate was compared to other conventional phosphate binders (Figure 2). The monthly model input variables were projected out to determine annual cost estimates. An additional Monte Carlo simulation demonstrated (at 90% probability) that a provider serving 500 dialysis patients could save between US$626,000 and US$1,106,000 annually with the use of ferric citrate.
With the help of @RISK, the researchers were able to prove that this promising new drug could help reduce expenses for a health care system that's desperate for cost reductions.
Read the original study here.

Assessing the Sun: A Scenario Analysis Weaves Solar Power with Hydroelectric in South America

As many experts have discussed, the road to sustainable energy must be paved with multiple different types of renewable resources. Elio Cuneo,an electrical engineer and Chair of Energy Management and Administration at the Universidad Santa Maria in Venezuela, tackled this conundrum in his white paper, titled: "Water and sun, certainty and volatility: Ideal Pairing for Electricity Supply in SIC."

Sistema Interconectado Central (SIC), which stands for Central Interconnected System in Spanish, is the main alternating current power grid in Chile. In July 2008 a solar measurement station with a tracking system was installed in the north of Chile. The objective of these measurements was to research the potential of global and direct radiation for a possible use of the solar power in the north of Chile for energy efficient production in SIC, which largely relies on hydroelectric power.

Cuneo ran stochastic models using Palisade's @RISK software, and found that including solar power generation represents the equivalent of a “rain” insurance for the SIC system, especially for hydroelectric plants that operate with reservoirs; in fact, having a high certainty of solar power generation is particularly relevant during drought scenarios.

In non-drought conditions, solar energy would also be beneficial; water is stored, leading to lower operation costs and lower spot market prices. Cuneo goes on to explain, "as the benefit is received by end-users as well as by hydroelectric plants with reservoir capacity, the cost of this “insurance” must be prorated between all of them", in order to make solar technology development financially attractive.

Read the white paper here.

See also: As Hydropower Moves to Small Dams, Big Dams use Risk Analysis Solutions to Meet Energy Conservation Goals


Free Webcast this Thursday: "Modeling Multi-Staged Investments with @RISK" with Eric Torkia

Register now for a free webinar to be presented by Eric Torkia. Don't miss this opportunity for inside tips from a successful consultant who uses Palisade risk and decision analysis software solutions to address current problems in financial risk analysis.

"Modeling Multi-Staged Investments with @RISK"

Free webcast this Thursday, 25 July 2013
11am EDT

When planning a multi-staged investment such as new product development or the deployment of a new asset consisting of multiple stage gates, the consequences on analyzing NPV risk are substantial. This free live webcast will show you how to model multiple gates as well as their impact on financial performance. Also presented in this model are how to assess completion stages and probabilities of investment success:

  • Overview of traditional discounted cash flows versus expanded NPV
  • Understanding and modeling product pipelines
  • Integrating expert judgment/opinion into your predictions
  • How to combine multiple staged investments into an optimized investment portfolio

We will discuss these topics as well as present practical models and applications using @RISK.

» Register now for the free webcast "Modeling Multi-Staged Investments with @RISK"

About the Presenter

Eric Torkia, MASc is a senior management consultant/trainer and business analyst. He has collaborated with some of the world's most recognized organizations to ensure the optimal design and delivery of enterprise systems, analytics as well as new forecasting and decision making processes.

Eric combines a unique set of skills and competencies revolving around performance, risk and change management to bring about durable business performance improvements: Financial and project based valuations, Project Risk Analysis on 1+ billion dollar projects, Performance Management business analysis and consulting, Spreadsheet Modeling and VBA automation for simulation, forecasting and optimization, Change Management consulting and training and instructional design relating to the adoption and implementation of enterprise analytics.

Eric’s academic background includes a Master’s degree in information systems management from the University of Québec in Montreal as well as a BBA in international marketing and management from Northwood University Florida.

» View the complete webcast schedule, and see past presentations in the Archive


Troubled Waters: Report Calls for New Risk Analysis Services when Estimating Flood Insurance

As our weather patterns change and become more severe, it can’t be denied--climate change is upon us, and with it are some serious changes to life as we know it.  Take, for example, a recent report  commissioned by FEMA and  written by the National Research Council which outlines the true risks and costs of flooding in the Missouri and Mississippi river flood plains, and attempts to accurately price out flood insurance in a way that recovers actual costs.

The report highlighted the fact that flooding is bound to increase in severity--and thus, it's crucial to have a modern, statistically sound approach using risk analysis when analyzing and managing flood risk in areas protected by levees. Palisade’s @RISK software is used around the world for these type of analyses, and has in fact been used to analyze the risks and rewards of flood mitigation in the UK .  The National Research Council stated a need for state-of-the art estimates on how well levees will perform, in order to paint an accurate picture of the likely risks communities might face during flood conditions. Scenario analysis is key--multiple variables must be analyzed, such as how high a river might rise, and how many times will it crest it’s specified flood level.

According to Gerald Galloway, an engineering professor at the University of Maryland  who chaired the panel that produced this report, flood losses are continuing to rise. In fact, the National Weather Service predicts roughly $8 billion per year in flood losses--a number that is bound to grow as climate change continues.

The report states that, as an administrator of the Nation's  flood insurance program, FEMA must adopt a more up-to-date approach to analyzing as well as managing the risks of flooding behind levees. “Property owners would be more favorably inclined to buy flood insurance if individual risk is well-known, understood, and insurance rates are priced to match the probability of flooding and financial impact of flooding events,” the report says. 

If FEMA chooses to tackle the problem using @RISK, they'll be sure to have accurate answers to these complex questions.


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


April 2013 Academic Enews: Research at Curtin University of Technology Explores Tools for Teaching Probability and Risk

Research at Curtin University of
Technology Explores Tools for Teaching
Probability and Risk

Palisade April 2013 Academic Enews
In This Issue

» Research at Curtin University of Technology Explores Tools for
   Teaching Probability and Risk

"The seamless integration of Palisade products into the Excel
 development environment is a huge advantage... This in turn
 reduces training and system development costs, because risk
 departments are not investing in expensive/extensive
 proprietary system solutions."

     Darren O'Connell, Researcher, Curtin University of Technology

» Recent School Adoptions

» Licensing Options

» Teaching Tips & Examples
   Forecasting Income of a Major Corporation

» Tech Tip
   Bayesian Revision Command

» Textbook of the Month
   Value-Added Decision Making for Managers

» Featured White Paper
   Onion Production, Packing, and Storage Feasibility on
   the Navajo Indian Irrigation Project

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

» Worldwide Training Schedule

» About Palisade and the DecisionTools Suite

» Story to Share?



Struggling with your NCAA bracket? Try Monte Carlo simulation, with help from the pros.

Each March, office productivity is greatly impacted by the NCAA Men’s Basketball Tournament. Just about everyone—regardless of their passion for college basketball—fills out a bracket in hopes of winning their respective pool (or pools). Some rely strictly on their knowledge of the teams involved, while others choose winners based on uniform color, where they’d rather live or other arbitrary strategies.

Wayne Winston might suggest utilizing Monte Carlo simulation to enhance your chances of racking up bracket points. Winston, who is a Professor of Decision Sciences at Indiana University, spends a great deal of his free time crunching numbers and producing probabilities of how teams will perform. This time of year, he determines the probability that schools in the 68-team field have of losing in the first round, winning the national championship and everything in between, with his use of @RISK. His methods were recently mentioned in a Wall Street Journal article.

Using power rankings from USA Today’s Jeff Sagarin (who just happens to be his best friend) and the tournament seedings, Winston simulates the tournament 10,000 times to get his results. Before the tournament started, he found Louisville to have a 21.6% chance of winning the national title. After winning their first two games against North Carolina A & T and Colorado St. and advancing to the Sweet 16, Louisville’s probability to win it all rose to 26%.

From time-to-time, the most unlikely statistical situations become reality. Before 2013, no 15-seed had ever advanced further than the first round of the NCAA Men’s Basketball Tournament, so it was no surprise that Florida Gulf Coast University had only a 1.5% chance of making it to the Sweet 16, and virtually no chance of winning the national championship. The Eagles’ statistical defiance changed the face of many brackets when they upset both Georgetown and San Diego St. to advance to the Sweet 16. Despite their two magic moments, Florida Gulf Coast University still has mere a one one-thousandth of a percent chance of cutting down the nets in Atlanta on April 8. It’s a statistical long shot, but one we—and Wayne Winston—will be watching with great anticipation.

To see more of Wayne Winston’s sports probability work, visit his website:

» www.WayneWinston.com
» "Schools You Want to Strangle," in the Wall Street Journal


Research at Curtain University of Technology Explores Tools for Teaching Probability and Risk

Textbooks that touch upon technology-related subject matter face the challenge of topics becoming outdated by the time the books go to press. Darren O’Connell found this type of content stagnation to be readily evident in how risk analysis is taught in institutes of higher learning. In fact, he found risk analysis lessons were not only behind the times, but not nearly as accurate as more current methods of calculating risk.

For his doctorate research at Curtin University of Technology (Australia), O’Connell compared the traditional method of teaching risk through the use of normal distributions, to a probabilistic method, featuring @RISK, StatTools and RISKOptimizer. Having utilized Palisade solutions professionally for financial risk analysis, O’Connell was convinced that new technologies offered more efficient and accurate means of teaching risk. To illustrate his point, O’Connell presented methods of modeling the stochastic price process of two illiquid securities under uncertainty by application of probabilistic techniques, in order to manage price risk within a Value-at-Risk (VaR) framework. To do this, he utilized multiple Palisade solutions. His research discovered that the newer methods were not only more accurate, but they were more user-friendly and cost-efficient.

“The benefits gained from using Palisade software were the ability to select probability distributions from a large universe, which opened up greater statistical modeling possibilities that develop more realistic solutions to problems encountered by industry practitioners,” reports O’Connell. “The seamless integration of Palisade products into the Excel development environment is a huge advantage, and allows practitioners to learn to use DecisionTools as if it’s a natural extension of learning Excel. This in turn reduces training and system development costs, because risk departments are not investing in expensive / extensive proprietary system solutions.”

» Read more about O’Connell’s research
» View a detailed slideshow


Postgraduate Certificate in Risk Analysis in Health and Food Safety at the Royal Veterinary College of the University of London

  • 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


@RISK and DecisionTools Suite 6.1 Release Preview Now Available

Palisade is pleased to announce that version 6.1 of @RISK and the DecisionTools Suite is coming soon. This new version will feature an enhanced, faster engine for the simulation of Project schedules, as well as compatibility with Excel 2013, Windows 8, and 64-bit versions of Microsoft Project. It has also been translated into Spanish, Portuguese, German, French, Japanese, and Chinese.

We encourage you to try a special Release Preview of version 6.1 available now, in all seven languages.

» Download the 6.1 Release Preview

Your feedback will help Palisade to improve the final product.


@RISK from Palisade plays key role in LEGO’s Enterprise Risk Management strategy

LEGO's Enterprise Risk Management strategyOperational risk management has been a key part of the LEGO Group’s strategy for many years. The approach is used to handle issues including supply disruptions, demand volatility, currencies, employee health and safety, and product quality and safety.

Today, the sophistication of LEGO’s Enterprise Risk Management (ERM) framework is widely recognised. It is one of the foremost companies to use Monte Carlo simulation to quantify risk and present key risk information to its board of directors for decision-making purposes. @RISK from Palisade helps the LEGO Group to manage much of the risk it faces. This gives the company a true understanding of the volatility that it believes is inherent in its activities, in order that it can act to pre-empt it.

The LEGO Group uses @RISK to consolidate its risk portfolio. The standard way to calculate overall risk is to multiply the likelihood with the impact for each risk, and add up the total for the portfolio giving an average loss. The LEGO Group however takes a more strategic approach, in the belief that risk management is about extremes, not averages. It wants to know what will happen in the 10% chance that something does occur, not the 90% chance that it doesn’t.

LEGO Risk Management therefore identifies all risks it faces which include factors such as competitor infringements, currency risk and vendor breakdown (if a packaging vendor suffers a strike or a fire, for example, this impacts LEGO’s ability to do business). It then quantifies the risks with @RISK so that each risk is assessed in terms of the chance of it happening and the cost / impact if it does.

Once management has defined figures for all risk factors, it adds up the total exposure that it faces using a Monte Carlo simulation. From this the 5% worst-case exposure is looked at, and compared to the risk tolerance that the company has set itself, based on its earnings, to see if this is acceptable. If it is above the risk exposure, risk handling needs to be addressed to reduce the risk. If it is below, the company is allowed to follow a more aggressive – or ‘risky’ - policy.

Knowing its risk tolerance and consolidated exposure against its actual tolerance enables management to make informed and intelligent decisions about its capacity to take on more risks or be more cautious.

Defining and addressing strategic and operational risks enable the company’s managers to take prudent and proactive mitigating actions, which result in better performance.


"Risk Analysis Will Drive Better Decisions Across the Supply Chain" in Supply Chain Digital magazine

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"


"Using Technology to Navigate Risk," in Executive Insight magazine

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"



Fish Stock Levels being Threatened by Disease: @RISK gives aquatic farmers ability to test for disease cost effectively and implement key biosecurity measures

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



New in DecisionTools Suite 6: New Examples and Tutorials

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