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

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

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

See the original article (in German) here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

 

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Palisade Celebrates 30th Anniversary in 2014

 
 

 

Leader in Risk & Decision Analysis Software for 30 Years

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

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

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

Happy 2014 from all of us at Palisade!




 

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

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

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

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

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

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

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

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

More example of Custom Development:

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Custom Solutions: Using @RISK for Oil Field Development Decisions

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

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

Oil Field Development Screenshots

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

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

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

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

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

» Learn more about Palisade's Custom Development

You may also be interested in the following:

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

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

 

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

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

2014 Palisade Training Opportunities

Australia
Melbourne: 22-23 January 

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

Latinoamérica
México D.F - 28-30 de enero

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

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

» Register now for a Palisade  training seminar

Learn to Make Better Decisions 

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

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

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

» Learn more about the new features in version 6.2

 

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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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Hitachi taps Palisade RDK Software to help manage Supply Planning

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

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

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

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

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

Read the case study here.
 

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

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Palisade Software Aids Business and Research in Japan

First Palisade made its mark in China--now we're establishing success in Japan. Two recent case studies detailed the use of Palisade's @RISK software by both a major Japanese company, Hitachi Solutions East Japan, and a researcher at the University of Tokyo illustrate how our easy-to-use software can benefit businesses and academics across the world.

The Hitachi case study details how executives at the manufacturing company used @RISK Developer Kit to analyze supply chain and inventory management. They created a stand alone graphical user interface to visualize production and inventory conditions, while also incorporating @RISK’s excellent risk analysis functions. @RISK’s Developer Kit made it easy to tailor the program to Hitachi’s needs and desires.

At the University of Tokyo, Professor Katsuaki Sugiura at the Laboratory of Global Animal Resource Science used @RISK to  improve the surveillance program for bovine spongiform encephalopathy--otherwise known as mad cow disease, in beef production in Japan.

Read the case studies in English here and here.

Both of these reports are available in Japanese on the Palisade website:

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

o improve the surveillance program for BSE in beef production, - See more at: http://blog.palisade.com/blog/risk-and-opportunity#sthash.0W8NnwG8.dpuf
o improve the surveillance program for BSE in beef production, - See more at: http://blog.palisade.com/blog/risk-and-opportunity#sthash.0W8NnwG8.dpuf

 

 

ta and risk analysis of supply chain management, production, and sales & inventory planning and management. Analyzing these elements can be tricky, particularly when it requires forecasting demand and prices of raw materials. Using the @RISK Developer kit, Planning Department Research Division Head Masaru Tezuka and his team were  able to do these analyses. - See more at: http://blog.palisade.com/blog/risk-and-opportunity#sthash.0W8NnwG8.dpuf
ta and risk analysis of supply chain management, production, and sales & inventory planning and management. Analyzing these elements can be tricky, particularly when it requires forecasting demand and prices of raw materials. Using the @RISK Developer kit, Planning Department Research Division Head Masaru Tezuka and his team were  able to do these analyses. - See more at: http://blog.palisade.com/blog/risk-and-opportunity#sthash.0W8NnwG8.dpuf

 

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Palisade's Risk Analysis Solutions at Work in China

Palisade is establishing a robust presence in China. Recently, Palisade published two new case studies from the country; one details how the Shanghai Food and Drug Administration uses @RISK software for risk and decision analysis in food safety  and risk assessment. Specifically,  @RISK has helped the Shanghai FDA carry out exposure assessments of chemical and biological contaminates, as well as analyzing surveys of data on residents’ expenditure on various foods. In one case, @RISK helped asses nitrite contamination risk for cooked meats, in another, it aided in evaluating the likelihood of vomitoxin contamination of wheat products. With these and many other successes, the Shanghai FDA has been able to implement effective risk management recommendations.

The other Chinese case study details how @RISK and the DecisionTools Suite have been used in Professor Li Mian's research and his graduate-level engineering course at Shanghai Jiao Tong University. Prof. Li 's research includes complex engineering system design and optimization, decision-making and optimization theory.

Both of these reports also appear in Chinese on the Palisade website:

Read the case studies in English here and here.

See also: Palisade's Risk Analysis Software Ensures Shanghai Food Supply is Safer Palisade's Decision Tools Used At Shanghai's Top University

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Looking for inspiration for your models? Palisade just added 5 new Example Models!

Palisade provides a collection of example spreadsheet models that highlight different applications of @RISK and the DecisionTools Suite. These example files demonstrate a variety of risk analysis solutions, including credit risk analysis, financial risk analysis, energy risk analysis and more! Below are a sample of five of our newly posted example models.

5 New Example Models from Palisade

Price Evolution in Markov Chain (Minimum edition: @RISK 6.0 Standard)
A Markov chain is a process observed through time where the probability distribution of the next state of the process, given the current state, is independent of the past states. When dealing with Markov chains, it is always interesting to see whether future statistics depend much on the starting state.
» Download Example Model

Projecting Oil Prices (Minimum edition: @RISK 6.0 Industrial)
This model illustrates one possible way oil prices might change through time, as influenced by the market. @RISK's distribution fitting tool is used to simulate future absolute price changes based on historical daily oil prices.
» Download Example Model

Hydroelectric Power (Minimum edition: @RISK 6.0 Standard)
This model illustrates one possible simulation of hydroelectric power generation for a 120-month horizon. There are three sources of uncertainty: monthly desired power (as a percentage of the maximum possible output), monthly rainfall, and monthly evaporation. This model is based on Roy L. Nersesian's book Energy Risk Modeling.
» Download Example Model

Solar and Wind Power 1 (Minimum edition: @RISK 6.0 Standard)
This model illustrates the daily output of a combination of solar and wind energy units. The solar unit is affected by cloud cover with a temperature adjustment. The wind unit is modeled by a random wind speed and an ouput function of this wind speed. The @RISK outputs include hourly and total daily output values for solar, wind, and combined solar and wind. This model is based on Roy L. Nersesian's book Energy Risk Modeling.
» Download Example Model

Solar and Wind Power 2 (Minimum edition: @RISK 6.0 Industrial)
This example extends the previously listed Solar and Wind Power 1 model. Its goal is to use RISKOptimizer to find the best combination of solar and wind units to match uncertain energy demands for a 100-day period. This model is based on Roy L. Nersesian's book Energy Risk Modeling.
» Download Example Model

 

The above example files deal with risk analysis solutions in the marketing and energy sectors.  Palisade also offers example models in a variety of other industries including academia, agriculture, construction, pharmaceutical, transportation and more!

» View other @RISK and the DecisionTools Suite example models

» Download a free trial version of the DecisionTools Suite to view the models in full

 

See also: New in DecisionTools Suite 6: New Examples and Tutorials

 

 

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2013 Palisade Training Opportunities: Make Better Decisions with @RISK and the DecisionTools Suite

Now that the new version 6.2 is available, it is a great time to join us for one of our last few trainings scheduled on our calendar for 2013! Or maybe a live web training may be a better fit for you? Either way, you will learn how to incorporate @RISK and the DecisionTools Suite into your day to help you make better decisions.

For almost 30 years, Palisade software and solutions have been used to make better decisions. Cost estimation, NPV analysis, portfolio analysis, operational risk registers, insurance loss modeling, reserves estimation, schedule risk analysis, budgeting, sales forecasting, and demand forecasting are just some of the ways in which Palisade software tools can be applied.

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

By the end of a 2-day course, attendees should be able to perform defensible risk assessments using @RISK software. The 3-day course covers the other products in the DecisionTools Suite, including PrecisionTree, RISKOptimizer, Evolver, TopRank, StatTools, and NeuralTools.

 

Decision-Making and Quantitative
Risk Analysis using @RISK and the DecisionTools Suite

 

EMEA and India

London - Oct. 22-24Mumbai Training
Johannesburg - Oct. 29-31

Oslo - Nov. 19-20
Mumbai - Nov. 25-26
London - Dec. 3-5

Milan - Dec. 10-12
 

US and Canada

Denver - Nov. 6-7 

Los Angeles - Dec. 3-5

 

Australia
Perth - Nov. 20-21  
 

Evaluación de Riesgos en Proyectos de la Industria de la Construcción e Infraestructura
 

Latinoamérica
México D.F - 3 al 5 de diciembre  

 

Avaliação do Risco para Usuários @RISK e Decision Tools Suite

Brasil
Belo Horizonte - 23 - 25 de outubro
Curitiba - 23 - 25 de outubro

Brasília - 6 - 8 de novembro
São Paulo - 20 - 22 de novembro

 

» Register for a Palisade  training seminar 

 

 

Live Web Training

Live Web Training is delivered by an expert instructor via an interactive web session and telephone conference. Course notes and examples files are emailed to you. With online training you can avoid travel time and costs while still interacting with the instructor and group.

Decision-Making and Quantitative Risk
Analysis using @RISK, Part I

October 31 - November 1

Decision-Making and Quantitative Risk
Analysis using @RISK, Part II

November 14-15

Decision Making and Quantitative Risk Analysis
using the DecisionTools Suite, Part I

December 9-10

Decision Making and Quantitative Risk Analysis
using the DecisionTools Suite, Part II

December 19-20

» See the Live Web Training schedule and register today

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Palisade's Monte Carlo Simulation Software Featured in Quality Magazine

Palisade Corporation got a shout-out in the August edition of Quality Magazine, a monthly business publication serving the quality assurance and process improvement needs of more than 64,000 manufacturing professionals. The article, “Simulation City” by Michelle Bangert, discusses Monte Carlo simulations and how they can be used in a variety of industries and situations.

Randy Heffernan, Vice President of Palisade is quoted in the story, explaining why companies use simulation software. “A lot of times, it comes out of a larger cost-cutting or waste reduction at the company as well as quality improvement,” he said in the piece. He goes on to explain that software like @RISK can help reduce material waste and the time, and that the cost and availability of a material can have a huge impact on production. “The risk of not having what you need when you need it is big,” Heffernan said. “But this is not intuitive…There is an assumption that raw material is just there waiting for you. But that’s not really true.”

The article continues, “with global supply chain issues caused by the floods in Thailand a few years ago or the tsunami in Japan, more people are becoming aware of the supply chain risks and the related quality of manufacturing. 'How do you maintain quality in the face of uncertain suppliers?” Heffernan asks. Though companies can find backup suppliers, they don’t want to use too many in order to maintain economies of scale. This is where software can step in to help find a solution.'”

The software can provide models using three different suppliers, such as sourcing 70% from supplier number one and seeing the uncertainty level.  “Software can do those calculations for you,” Heffernan said. “There’s no way people can do that manually.”

Read the original article here.

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

 

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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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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

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

When alternative energy sources are discussed, hydroelectricity typically isn’t mentioned before solar, wind, or biofuel. Hydroelectricity, which generates power through dams and river currents, is a power source more associated with the first half of the 20th century. That said, there are still areas that rely heavily on hydroelectricity, such as British Columbia, Canada. BC Hydro, which utilizes @RISK to develop energy conservation strategies, supplies 90 percent of the province’s electricity.  
 
In a recent Risk & Insurance article by Gregory DL Morris, the future of hydroelectricity was considered, highlighting BC Hydro’s transition away from large traditional dams to smaller, “run-of-river” dams. Larger dams are often less efficient and more expensive to maintain, as pointed out by Basil Stumborg, a decision analysis expert at BC Hydro. In the article, Stumborg mentioned that @RISK is utilized in the effort to calculate risk factors in aging dams, which assists in the development of energy conservation strategies: 
 
"There is a huge incentive for utilities such as BC Hydro to encourage energy conservation. But while the motivation is there, it is often difficult to know whether these ambitious targets can be achieved. We have been using Palisade's risk analysis software @RISK to communicate complex analyses, and have been able to set very aggressive energy conservation goals.”
 
"From a risk-management point of view, we have found we can build risky things into your plan, but you have to know what your red flags are, and when to use your off ramps," he said.
 
As hydroelectricity scales down to smaller, more efficient dams, it is exciting to see @RISK playing a part in making BC Hydro’s traditional dams more energy efficient.
 
 
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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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See how a customized Retirement Saving template assesses the performance of a portfolio in future years

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 to analyze the investment of funds for retirement planning.  The application prompts the user for profile characteristics of the client and portfolio parameters. 

Once the information is entered, the application runs an @RISK simulation to assess the performance of the portfolio in future years as well as the effects of various withdrawal rates after retirement.  Results are presented in tables and graphs.

This video demonstrates how easy it is to utilize this Custom Application:
  1. Define Profile Parameters
    The user inputs the profile characteristics of the individual whose profile is to be modeled. 
     
  2. Define Model Parameters
    The next step is to add the probability distributions for the return of each of the investments. 
     
  3. Simulate and View Results
    Observe multiple simulations and view the custom reports that are provided.
     
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 cost estimation, retirement planning, oil and gas prospecting, portfolio risk management, and more – all utilizing @RISK technology in Excel. 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. Because the application is in Excel, the training required for users is minimal. XDKs come with the DecisionTools software PrecisionTree, StatTools, NeuralTools, RISKOptimizer, and Evolver as well as @RISK. 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. 
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