PALISADE INSIGHT

Key Project Management & Decision Analysis Text Expands on DecisionTools in New Edition

What are the characteristics of successful managers? Surveys consistently show decision-making ability at or near the top of the lists. Perhaps no management activity is more important. Risk and Decision Analysis in Projects by John R. Schuyler presents the approach and principal techniques of decision analysis to help the reader realize faster, more confident, and better decisions.

Risk and Decision Analysis in Projects has long been a go-to resource for project managers looking to get a better handle on risk. Now, new edition 3.1 offers a complete re-write of the best-selling previous editions. The techniques described are applicable to all types of project decisions, estimates, feasibility analyses, and buy/sell valuations. With Risk and Decision Analysis in Projects and a little practice, decision analysis is easily integrated into a professional’s daily problem-solving approach.

As in previous editions, Schuyler has incorporate the use of @RISK throughout the text, applying it to new venture analysis, schedule audits, project sensitivity analysis, contingency planning, and much more. Both cost and schedule risk are subject to a wide range of uncertainty in any project planning exercise, and @RISK is well-suited to confidently assessing just how great those uncertainties are and what to do about them.

In addition, Schuyler explores the benefits of using PrecisionTree to better understand the sequence of decisions in complex problems, and to quantify the value of information in the face of unknowns. Furthermore, Schuyler explains how best to cope with uncertain values at various points in a decision process by incorporating Monte Carlo simulation from @RISK. This blending of two powerful techniques is a unique attribute of DecisionTools Suite that provides insights unavailable anywhere else.

Furthermore, optimization is explored as a means for deciding which projects to pursue in a portfolio, and for other types of resource allocation challenges. RISKOptimizer and Evolver come into play here, offering a range of optimization methods to best suit each different situation.

Throughout the text, real-life situations are explained in clear, easy-to-follow language and steps. The new edition offers online supplements and new methods that are both proven and accessible. No matter what industry you’re in – oil and gas, utilities, manufacturing, pharmaceuticals, technology, finance, you name it – the content in this book will be directly applicable to you. Making good decisions over the long term increases the probability of meeting your objectives. Those using decision analysis can sleep well at night knowing that they have made the best possible choices under the circumstances.

Learn more and purchase here.

See new @RISK version 8 at the Palisade Risk Conference in San Antonio

Palisade developers give you an inside look!

On November 12-13, be among the first to get a look at the exciting next release of @RISK – new version 8! Join us at the Palisade Risk Conference in San Antonio to see not only what’s new, but how you can take your decision-making to the next level.

Each year, Palisade hosts workshops and conferences around the world, culminating in a grand 2-day event. This year in San Antonio, our Development team will be in attendance to demonstrate @RISK version 8, show off the latest enhancements, and hear directly from @RISK users.

Don’t miss the chance to get a first look at Palisade’s new @RISK, direct from the source! Join us in San Antonio.

Registration is free to qualified risk professionals.

Meet Our Management Team

Over the last year or so, we’ve been assembling a “new” management team here at Palisade as part of our strategy to take the company to new levels. I say “new” in quotes because most (but not all) of the team are Palisade veterans. We’ve restructured responsibilities and put systems in place to support a globally-focused mission of elevating the quality of decision-making in sectors around the world. Meet the team!

Erik Westwig, Director of Software Development

Erik Westwig has worked in software development at Palisade for nearly 25 years, and leads all the company’s core product software development efforts.

Erik has long been a key architect behind Palisade’s flagship product @RISK, which performs Monte Carlo simulation and optimization in Microsoft Excel. Having written large portions of the @RISK code directly, Erik has also led development teams throughout the company’s history. In addition to @RISK, he has spearheaded the development of PrecisionTree, Palisade’s decision analysis add-in to Excel, as well as coordinated production of the company’s fully integrated DecisionTools Suite of analytical tools.

Erik enjoys heavy metal and Broadway show tunes.

Denise Castellot, Vice President of Global Sales

Denise Castellot has managed sales teams at Palisade for over 12 years, and now leads the company’s expansion efforts all over the world.

Denise began at Palisade focusing on Latin America. Under her leadership, the company presence in both Brazil and the rest of Latin America grew exponentially. She has also led teams in Asia-Pacific and the US. Having sold directly into these markets herself, Denise brings a firm understanding of market challenges as well as a hands-on management style to the role. As VP of Global Sales, she is a unifying force for the company’s distributed global team, applying best practices and scaling outreach efforts in exciting new ways.

When not spreading the gospel of risk management, Denise can be found galloping through the countryside on one of her horses.

Scott Burch, Vice President of Finance

Scott Burch joined our team in April 2019 and develops and executes innovate new financial strategies that directly impact the bottom line.

Scott’s remit includes financial engineering, systems improvements, analytics and cash management, all of which further enable the company to achieve its strategic goals of providing the best possible decision-making solutions to Fortune 500 professionals worldwide. Scott also works closely with Palisade’s equity partner Thompson Street Capital Partners to leverage their experience and expertise.

Prior to Palisade, Scott was corporate accounting manager for PAR Technologies, controller at XPO Logistics, and Vice President at Tompkins Financial Corporation. Scott spends his downtime keeping his dog from eating the paneling off the walls of his house.

Shannon Kelly, Director of Marketing

Shannon Kelly has worked in marketing at Palisade for over 20 years, and currently leads the company’s branding, outreach, and demand generation efforts globally.

Shannon began as the company’s graphic designer and quickly became the webmaster as well. Over the years, she has led multiple re-branding efforts, product launch campaigns, and web site overhauls. She and her team have produced materials and campaigns in eight different languages. Shannon launched and oversees Palisade’s global events series, which includes conferences, workshops, and industry exhibitions all over the world. The two-day Palisade Risk Conference has become the leading event of its kind in the risk decision-analysis space. She is also responsible for Palisade’s marketing analytics efforts, helping to target our messaging and content to be relevant and useful for our customers. She and her team are focused on understanding the customer’s journey, in order to build and nurture customer relationships that last for years.

When not directing global marketing, Shannon can be found on the dog agility circuit.

Julie Ellis-Grove, Director of Accounting

Julie Ellis-Grove has worked in accounting at Palisade for six years, and is responsible for the smooth operation of the company’s receivables, payables, payroll, cash, tax, and other functions.

Over the years, Julie has revamped AP and AR processes, set up new reporting systems, and managed cash and tax functions in four different countries. More recently she led the diligence effort during Palisade’s capital restructure with Palisade’s private equity partners Thompson Street Capital Partners. Among her latest challenges is co-leading an initiative to upgrade and overhaul Palisade’s ERP and accounting software systems, which will provide the company with greater efficiencies and real-time reporting like never before.

If that weren’t enough to keep her busy, at 6:00am most mornings Julie can be found at CrossFit.

Gustavo Vinueza, Director of Custom Solutions

Gustavo Vinueza has worked in the consulting, training, and custom development area of Palisade for nine years, and is currently responsible for scoping and producing customized software solutions for Fortune 500 companies around the world.

During his tenure, Gustavo has leveraged his technical and financial background to understand the varied and unique needs of customers in many different industries to better formulate solutions tailored for each client. Having started by providing training classes and developing spreadsheet models for clients, Gustavo has since grown to lead a team of consultants and programmers whose mission is to create robust, bespoke software solutions based on Palisade’s @RISK and DecisionTools technologies. To date, the Custom Solutions team has helped Fortune 500 clients in manufacturing, engineering, defense, utilities, banking, energy, and many other sectors.

Gustavo is an active street runner and his goal is to, one day, run a marathon.

Randy Heffernan, CEO

That’s me – for over 20 years, I’ve worked in nearly every department at Palisade, including sales, marketing, operations, and development. Working closely with sales and product teams, I’ve had the opportunity to lead product launches, enter new markets, and establish Palisade offices in multiple new countries. During that time, the company has quadrupled in size and expanded its reach to become the dominant force in modern analytical decision-making and thought leadership.

My focus now is to take Palisade to the next level in its 30+ year history. Building on a marketing-leading product and a world-class sales force, our aim is to lay the foundation for the next generation of accessible, powerful spreadsheet-based analytics and to reach segments who don’t yet know the power these tools can bring.

Besides risk analytics, things that I think are fun include mountains, English history, and Star Trek.

Learn more about the team here!

International Monetary Fund uses Monte Carlo Simulation for Stress Testing

An IMF working paper this month contemplates the effectiveness of lending arrangements the institution makes to various countries around the world. The paper, “Assessing IMF Lending: A Model of Sample Selection,” seeks to identify and understand common factors that make programs effective – or not. Using Monte Carlo simulation to assess the impacts of various global shocks, the authors “suggest that higher external financing needs, larger exchange rate depreciation, lower GDP growth, as well as deteriorated global financial conditions, are associated with larger individual IMF arrangement sizes,” and that “the distribution of potential aggregate IMF lending exhibits a substantial right tail.” The analysis will serve as a basis for broader IMF lending policy discussions.

The paper touches upon a very common application of Monte Carlo simulation – that of stress testing. Stress testing, as defined by Investopedia, is: “…a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations. Such testing is customarily used by the financial industry to help gauge investment risk and the adequacy of assets, as well as to help evaluate internal processes and controls. In recent years, regulators have also required financial institutions to carry out stress tests to ensure their capital holdings and other assets are adequate.”

In the IMF’s case, the authors are examining whether their lending programs are sufficient to enable recipient countries to withstand various financial shocks. After the global financial crisis, the Dodd-Frank Act mandated stress testing of large banks to ensure sufficient capital reserves in the case of another downturn.

Monte Carlo simulation is ideally suited to stress testing, because it enables you to see the probability of an institution (bank, insurance company, central bank) of meeting its obligations in event of certain specific events. Straightforward Monte Carlo simulation enables this by allowing you to define uncertain inputs using probability distributions – for example, a lognormal distribution to describe the Dow Jones Industrial Average. @RISK takes this one step further with its Stress Analysis feature, which lets you specify which parts of an input distribution to sample during a simulation. For instance, if you wanted to sample the bottom 5^th percentile of a distribution in order to focus on a particularly negative scenario, @RISK’s Stress Analysis feature will do this automatically:

The Federal Home Loan Bank of Indianapolis has used @RISK for stress testing as part of its credit portfolio loss modeling. According to Brendan McGrath, Director of Credit Risk Analysis, Enterprise Risk Management at the FHLB, “The @RISK framework gives you robust tools to do sensitivity analysis and optimization, so our model gives us the ability to do a variety of stress testing and what-if analysis on the portfolio.” As a result of the analysis, the FHLB was able to identify key loss distributions, which allowed them to calculate Value-at-Risk. Importantly, they were also able to determine key drivers of default risk in order to reduce VaR going forward.

Interested in learning more? We can help you create your own stress testing models for a range of applications. Just contact our consulting and custom solutions team.

Palisade Announces 2019 Risk Conference in San Antonio

We are very pleased to announce that the 14^th annual Palisade Risk Conference will take place in San Antonio, Texas on November 12-13, 2019. The event will take place at the beautiful Marriott Riverwalk, and is expected to attract nearly 200 key decision-makers to share best practices and the latest trends in the practice of risk and decision analysis. The conference is one of the most important of the year in its field.

*Brendan McGrath of Federal Home Loan Bank of Indianapolis delivers the 2018 keynote address in San Diego.*

The Palisade Risk Conference is an important component of our role as a thought leader in the field. We feel strongly about providing like-minded professionals with this forum as a way to advance best practices and ultimately raise the quality of decision-making across a wide range of industries.

In fact, our attendees often cite the practical nature of the discussions the conference fosters. Michael Watson, a senior staff integrated planner for Lockheed Martin and recent conference attendee, commented, “We saw and discussed methods that directly apply to our problems, and learned to build upon them to come up with solutions.”

The conference will offer multiple tracks of sessions, ranging from software training to industry case studies and success stories regarding the use of probabilistic risk analysis to solve a wide range of problems. Sectors represented will include oil and gas, utilities, pharmaceuticals, manufacturing, transportation and more. Success stories and case studies are presented by companies such as the US Army Corps of Engineers, Unilever, Caltrans, BorgWarner, Pure Technologies, and many others.

You will also have the chance to participate in networking sessions, and to meet one-on-one with Palisade consultants to get advice on your specific modeling issues!

Now in its 14^th year, the Palisade Risk Conference is part of a global series of conferences and workshops we host to further interest and best practices in the field. More about the Palisade Risk Conference here.

See you San Antonio!

@RISK used by National Grid UK in Electricity Network Restoration Planning

National Grid UK, the electricity transmission system owner for England and Wales and the system operator for all of Great Britain, uses @RISK’s probabilistic modeling techniques to measure network restoration performance in a variety of simulated failure scenarios. In other words, if the system, or part of it, somehow breaks down, the people at the utility want to know what, and how long, it will take to get it working again, and what the challenges will be along the way.

» Read the case study

@RISK for Cost and Schedule Risk Using Risk Registers (with Example Model)

@RISK can be used in conjunction with MS Project and Excel to model the schedule and cost risks inherent in large, complex projects. This example demonstrates the use of @RISK to build a complete model of the construction of a new commercial venue. The model includes uncertainty in task times, a Risk Register for calculating contingencies, and a link to real-time cash flows in an NPV calculation model.

@RISK probability distributions have been assigned to the durations of several tasks in the schedule, some with a distribution and others using Risk Categories. The uncertain task times are assumed to be uncorrelated.

A Risk Register lists three possible risk events that could impact the project schedule and costs. By using the RiskProjectAddDelay function, these risks introduce schedule delays and associated costs. Specifically, this function allows the model to generate new tasks dynamically, depending on whether the risks occur or not. Changes are reflected at run time only, so it is necessary to run a simulation to see the impact and results of the Risk Register.

The example also contains a model of cash flows that leads to the NPV of the project. In particular, the project costs create a Timescaled Data report. This collects the total cumulative costs during a simulation. After a simulation, you can see the total cumulative costs for the project as they grow over time.

The other reports generated are the NPV and the Contingency for the Risk Register, at different confidence levels. Finally, the cash flow also includes a Revenue Adjustment calculation that takes the portion of the year in which Sales are initiated and applies a discount to the predicted annual revenue.

» Download the model (Requires @RISK 6.x Professional or higher, Microsoft Project must be installed.): XLSX file — MPP file
» Download a trial of @RISK Industrial

Financial Forensics Expert Forecasts Damages using @RISK

Palisade’s @RISK software is used for countless tasks all around the world and in many different industries from research institutions to oil and gas companies. While the possibilities are endless, Solis Financial Forensics LLC has found their niche in applying @RISK to a wide variety of complex legal cases and modeling economic damages such as lost earnings, lost profits and the diminishment of value.

Solis Financial Forensics LLC, founded by David Solis, undertakes financial investigations and analyses, forensic economic services, and business valuations. Much of their work is in the form of consulting, litigation support, expert testimony, and analysis of other expert reports in lawsuits of all kinds, including personal injury , wrongful death, wrongful termination, malpractice, business interruption/lost profits, fraud, breach of contract, construction claims, and partnership/shareholder disputes.

Where @RISK and Monte Carlo simulation typically come into play is when Solis is looking to the future. He’s not only trying to forecast what will actually happen, but what would have if there had been no problems and business had proceeded as usual. To do so, he looks at a variety of factors like historical trends and management forecasts in sales and expenses, and economic factors like the demand for the manufacturer’s products and inflation, for example.

“Using @RISK allows for a range or distribution in regards to the inputs,” Solis says. “For example, with the inflation rate I can say I believe it will not exceed X, it will not be less than Y, and I believe it will be Z in the future. @RISK allows me to say that I looked at a range of possible outcomes in regard to unknown variables, and based on my analysis incorporating those ranges, I believe lost profits to be X with a reasonable degree of certainty.”

» Read the full case study
» Learn more about @RISK

On-Demand Webinar: @RISK Correlation and Copulas: Gaining Insights into your Inputs

Correlation and Copulas

»Watch now: “@RISK Correlation and Copulas: Gaining Insights into your Inputs”

Gain additional insight into setting up and evaluating your risk analysis models in Excel, using @RISK. Learn how to incorporate correlation into your model to show how your input variables relate to one another while becoming familiar with basic concepts and terminology. Using @RISK’s correlation tables and copulas you will be able to acheive more accurate results.

Registrants also receive a link with example models and a slidedeck to accompany the presentation.

»Watch now: “Risk Register Focus: Introduction to Risk Analysis using @RISK”

» Download @RISK – try it for yourself!

CONTI Uses @RISK for Shipping Success

CONTI-Group has been a leader in the shipping industry since 1970, operating a large, deep-sea fleet in Germany as well as being an established global provider of ship investment funds. With commercial shipping being one of the most economical and ecological modes of transport for cargo, tangible shipping assets, including tankers and carrier vessels, represent an important form of financial investment.

After the financial crisis of 2007-2008, the European Union introduced new requirements for better regulation and supervision of the financial sector. These objectives aimed to introduce a new level of protection for investors by regulating and supervising all markets, and included the provision of quality and transparency in all capital market investments.

CONTI-Group was already unique in its reputation for financial transparency, but when these regulatory requirements for visibility were introduced, CONTI began using Palisade’s @RISK to construct financial models that capture and assess potential risks in the fluctuating shipping market. This has enabled the company to provide higher levels of transparency to its investors, successfully steer its shipping fleet, and subsequently generate above-average results on its investments.

“We wanted to find a risk management solution that would comply with the requirements of the new regulations, while also providing us with an even better way of tracking and managing financial risks,” explained Martin Stobinski, Managing Director for Risk Management, Compliance and Asset Valuation for CONTI KVG.

» Read the full case study
» Learn more about @RISK