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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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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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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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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2013 Palisade Risk Conference Series - Three stops coming up in November: Paris, Milan and Las Vegas

We have three cities left to go in our 2013 Risk Conference Series - Paris, Milan and Las Vegas! We have spanned the globe and stopped in 11 cities in the past 7 months. Last week at our Moscow Risk Conference we were able to present our latest versions of @RISK and the DecisionTools Suite programs which have been completely translated into Russian. According to Craig Ferri, Palisade's EMEA & India Director, "The speakers were of very high standard, and attendees were excited about the software and looking forward to being able to download the presentations. It was a great success and we look forward to new partnerships in Russia."

2013 Palisade Risk ConferenceThe Moscow conference, as well as the others in the 2013 Palisade Risk Conference Series, are beneficial for both novice and experienced users of our risk and decision analysis products. If you are a new user and unfamiliar with @RISK and the DecisionTools Suite, we invite you to see why 93% of the Global Fortune 100 are using Palisade products to make better decisions. If you are an existing user, this is your opportunity to network and be exposed to some useful hints and tips to get more out of our software.

In general, Palisade software enables clients to be more confident in the decisions that they make, in a wide variety of industries and applications. Clients use Palisade software in industries ranging from oil & gas, mining, and finance, through to utilities, insurance, and banking, along with government, manufacturing, and logistics. So, if one of your responsibilities is to create or base decisions on a credit risk analysis, financial risk analysis, or maybe a pharmaceutical risk assessment, or if you are looking to improve your project risk management strategies, we invite you to join us in one of the following cities to learn how other people utilize our software.

Palisade Conférence régionale sur le risque
Paris - 12 novembre
Voir le programme - Inscription

Palisade Regional Risk Conference Milan
Milan - November 14th
View Schedule - Register Now

Palisade Regional Risk Conference Las Vegas
Las Vegas - November 20th-21st *
View Schedule - Register Now

* 2-day event with 4 tracks for each day.

 

Previous 2013 Palisade Risk Conferences

An advantage of our software being available in 8 different languages is the Palisade's ability to provide risk analysis services throughout the world. The following is a list of the cities Palisade Risk Conferences were held this year. If you missed us in a city near you, be sure to look for us in 2014!

 

See also: Palisade Global Risk Conferences Advance Best Practices in Risk Management

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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

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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

 

 

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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

 
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Indian Media covers Palisade Case Study

Palisade was proud to recently be involved in a successful case study by L&T Institute of Project Management in India, which we covered in this blog previously.  With the help of Palisade's @RISK software, the Institute was able to help engineering outsourcing firms pinpoint risks that might hamper project success.

Other media outlets took notice.  APN News, an Indian online newsource, covered the project, as did the Telegraph, the largest circulated English daily in Eastern India.  The India Infoline news service, part of the IIFL Group, (a leading financial services company in India) also covered the story. Analytics India Magazine, a web-based publication which serves the needs of analytics professionals in India, covered the case study in full.  L&T's work was also reported on in Money Life, an Indian online webzine covering finance and economics.

The L&T Institute's cutting edge work on risk analysis as it relates to the engineering outsourcing industry has clearly made an impression on those media outlets covering the Indian business and financial world. This doesn't come as a surprise to those of us at Palisade, who understand the importance of risk management.

Dr. Chakradhar Iyyunni, Deputy General Manager and Faculty at the L&T Institute of Project Management pointed out  that "as the Indian engineering outsourcing industry matures, new service offerings emerge and the cost pressures and virtualisation of work increases, we need to develop more customised and scientific approaches to project management and delivery in order to enhance the competitiveness of engineering services organisations in India."

Project risk management analysis using Monte Carlo simulation promises to allow for rapidly emerging economies, like India's, to hone their project management strategies to better compete in the global economy.

Read the Case Study: Larsen & Toubro Institute of Project Management Uses @RISK to Develop Project Delivery Schedule Identification Methodology for Engineering Outsourcing Assignments

See also: Project Risk Management Strategies Help Indian Engineering Outsourcing Firms

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Project Risk Management Strategies Help Indian Engineering Outsourcing Firms

India has become a key provider of outsourced engineering serices for companies around the world. Larsen & Toubro Limited (L&T) is a major engineering and manufacturing company in the Indian private sector. The L&T Institute of Project Management conducts education and research in project management, and used @RISK  to help engineering outsourcing firms to pinpoint risks that might impede project success.

While the Indian engineering outsourcing industry has proven itself in the global playing field, the complexity of software applications has grown along with customer expectations--greatly increasing the type of risks that could significantly impact the growth and reputation of the engineering outsourcing industry. These risks include service provider's inability  to use the latest technologies due to proprietary reasons or other companies having an unseen competitive advantage.

Cultural mismatches or lack of synergy between expectations of sales and delivery teams can also lead to uncertainty, as can personal interactions and processes, organisational structures of service providers and customers, trust between teams, continuous on-boarding and attrition of personnel, etc.. Furthermore, gaps in technical understanding and alignment of project objectives across outsourcing and customer teams also add to uncertainty.

All of these factors can impact project scope and delivery schedules that can greatly impact customer satisfaction. Thus, the L&T Institue of Project Management conducted a study using @RISK to find a methodology that would allow these companies to best manage these risks.

“We chose @RISK for its ease of use and compatibility with Microsoft Excel,” said Dr Chakradhar Iyyunni, Deputy General Manager and Faculty at the L&T Institute of Project Management. “@RISK imports all the analysis into Excel, which means that we can use all the formulae in the software alongside all the @RISK features – a powerful combination for statistical analysis.”

Using a three-point estimation (optimistic, most likely and pessimistic), the team was able to construct probability distributions in @RISK to represent the uncertainty.

The analysis showed that at a 90% confidence level, an engineering project team could complete the work in 887 man-hours as if the project was being undertaken for the first time. For a 95% confidence level, the man-hours required would be 902 hours. This estimate could be used for repeat projects. 107 of these 902 hours could be used for contingency and a partial use of these hours would likely be acceptable to the client at the time of pre-project approval for billing. However, for a 99% confidence level, the team would require 925 hours to complete the project including 130 hours for contingency and a partial use of these hours would be acceptable to the client (pre-project approval) for billing as a trade-off to adhering to a stricter schedule.

This study concluded that this kind of three-point estimation using Monte Carlo simulation was a better way of creating robust project delivery schedules as opposed to a detailed risk analysis exercise, especially for short duration projects that are the norm in the engineering outsourcing industry.

Read the case study: Larsen & Toubro Institute of Project Management Uses @RISK to Develop Project Delivery Schedule Identification Methodology for Engineering Outsourcing Assignments

See also: The Economics of Supply Chain Risk Management using @RISK

 

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Manure into Money: Risk Analysis Solutions Pay Off

The energy market has shifted, ushering in an era where so-called wastes are being re-examined, and the desire for energy security and clean/green energy sources is rising. Rudd Asset Management (RAM), an energy consulting company specializing in cost-effective solutions and project risk management strategies, recently helped a large horse racing and competition complex that wanted to develop “green” policies that made economic sense. By using Palisade DecisionTools Suite, RAM determined that converting stall bedding and manure waste into renewable energy was a feasible, cost-effective solution—helping the complex turn a waste-disposal problem into a profit.

To begin with, RAM did a review of gasification of waste materials  from a number of nearby tracks. The ultimate goal was simple: get a win-win by changing a negative to a positive. Convert an increasing waste expense to a sustainable source of “green” renewable energy.

Unsurprisingly, the uncertainties were numerous. Variables that had to be considered included: cost to gasify the “fuel”; the cost of gathering the multiple fuel supplies; the cost to generate the power; the value of combined heat and power thermal energy; the quantity of fuel available each year, the energy used by the facilities each year; and the alternative costs to purchase the power from the local utility. RAM opted to use the Palisade DecisionTools Suite for the statistical analysis.

In this case, because the simulation determined that the wholesale power price drove the value, RAM next needed to confirm that the price was truly accurate. By focusing on variables with the most impact, RAM was able to  do a review in a lot less time, while getting better accuracy. The simulation results from the scenario analysis show the project is feasible, with an Internal Rate of Return of > 15 %, a Debt Coverage Ratio of > 2, and a Net Present Value positive within 5 years that would be robust after tax cash flows.

 “Palisade DecisionTools software is a great tool for our process,” says Mark Rudd, RAM President. “We help the client make better decisions more quickly using the power of Monte Carlo simulation and useful statistics.”

» Case Study: @RISK Helps Turn Waste Into Energy

» See also: Monte Carlo Simulation for Environmental Risk Analysis

 

0 Comments »

Accenture, Others Note Need for Better Risk Analysis in Capital Projects in Mining and Metals Sector

Accenture recently released research illustrating that mining and metals companies could "significantly reduce the costs of large capital projects" by improving their risk analysis and management methods. With billions at stake, and delays and budget overruns the norm, the need for better systematic accounting for risk has never been greater. Accenture’s research was based on 31 interviews with mining and metals executives around the world."

 
Palisade sees the same trend, with more and more companies in the minerals sector demanding sophisticated, yet easy-to-use quantitative risk solutions like @RISK. The topic spans other sectors involving mega projects as well, such as oil and gas, infrastructure (see Case Study section of this newsletter), aerospace, and defense. The scale and complexity of multi-billion-dollar projects means that risk cannot be ignored. Just a few companies in the mining sector who have publicly given recent talks or workshops on the topic at Palisade events include Collahuasi in Chile, Promon Engenharia in Brazil, Anglo American Kumba Iron Ore in South Africa, and Vale in Brazil.
 
Fortunately, @RISK’s Monte Carlo simulation is a great tool for understanding the various possible outcomes in any megaproject, and their probabilities of occurrence. With this information, project leaders can better understand the chances of going over budget or of missing deadlines, and what to do about it. @RISK identifies not only what the risks are, but what is driving them, enabling managers to set contingencies and make smarter decisions.
 
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Palisade Global Risk Conferences Advance Best Practices in Risk Management

Join us next week in London and Frankfurt.

In the last few months, nearly 1,000 professionals from around the world have gathered to push the boundaries of risk analysis through the Palisade Risk Conference series. Since March, Palisade Risk Conferences have been held in Santiago, Chile; São Paulo, Brazil; Johannesburg, South Africa; Tokyo, Japan; and Shanghai, China. Decision makers from industry and academia have presented dozens of real-life case studies, applying sophisticated quantitative techniques in new and exciting ways. These innovative approaches use Monte Carlo simulation, optimization, decision trees, and other techniques found in Palisade’s @RISK and DecisionTools Suite software to solve a wide range of pressing problems.

2013 Palisade Risk ConferencesSome examples include:

  • Using stochastic modeling for financial analysis in the mining industry
    Presented by Collahuasi Mining Co
  • Assessing the financial viability of new projects
    Presented by the Brazil National Development Bank
  • Risk assessment of capital projects in the power industry
    Presented by PricewaterhouseCoopers
  • Achieving optimal inventory levels to minimize cost
    Presented by Mitsubishi Chemical Company
  • Risk assessment of food safety imports
    Presented by the Shanghai Food and Drug Administration
  • Probabilistic risk analysis of cross-border oil projects
    Presented by Sinopec

Join us next week in London and Frankfurt! Upcoming dates:

 » 2013 Palisade Risk Conference Series

0 Comments »

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?

 

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

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.

1 Comments »

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

Oil & Gas Monitor features a regular column by Palisade's Rafael Hartke. The March column is titled "Practical Challenges of Implementing Risk Analysis in Oil Companies."

"Oil companies face a number of practical challenges when moving forward with deterministic (static, non-risk) analyses and implementing risk analysis within their decision-making process. Utilizing risk analysis during a project design and development—as opposed to after the project has already been decided—can add exceptional value to a project. In fact, it is easy to think of risk mitigation strategies that might transform a perceived high-risk project into a more acceptable one.

"However, before risk analysis begins, organizations must consider a number of challenges that could impede an accurate risk forecast. Some of these challenges include the organizational context of the company, the ability to build models and the decision maker’s risk profile."

» Read "Practical Challenges of Implementing Risk Analysis in Oil Companies" 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.

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March 2013 Academic Enews: Rotman School of Management Students Learn to Make Key Financial Decisions Using Monte Carlo Simulation

Rotman School of Management Students Learn to Make Key Financial Decisions Using Monte Carlo Simulation

Palisade March 2013 Academic Enews
In This Issue

» Rotman School of Management Students Learn to Make
   Key Financial Decisions Using Monte Carlo Simulation

"Many leading corporations are now using Monte Carlo simulation in their
 business cases. Students who want a leg up with such corporations
 should seek out all opportunities to get experience in working with
 Monte Carlo simulation."

     Professor Asher Drory, Rotman School of Management, University of Toronto

» Recent School Adoptions

» Licensing Options

» Teaching Tips & Examples
   The Miller-Orr Cash Management Model

» Tech Tip
   @RISK MiniToolbar

» Textbook of the Month
   Spreadsheet Modeling and Applications -
   Essentials of Practical Management Science

» Featured White Paper
   The Effectiveness of Using Project Management Tools and
   Techniques for Delivering Projects

» 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?

 

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Incorporating Project Risk Management Strategies in your Enterprise

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

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New in DecisionTools Suite 6: Integration with Microsoft Project for project risk modeling

@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

 

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