PricewaterhouseCoopers put together a beautiful video about the Corridor Budgeting program, developed by Tobias Flath and Michael Hofmann. Corridor Budgeting is a methodology combining planning, business management, and risk management in order to prepare for a range of possible outcomes, and thereby generate a more realistic picture of the future.
Palisade's DecisionTools Suite is an integral part of this program. As explained in the video: "We identify the factors underlying variables and ranges that impact on financial results. The Corridor is regularly analyzed and validated, giving visibility into any gaps or delta between target bandwidths and actual figures. Specially designed software then aggregates these bandwidths and event risks to paint an accurate picture of possible scenarios."
The video depicts modeling with Monte Carlo simulation: "A simulation models the total risk exposure. The width of the curve indicates the level of uncertainty. The height shows the likelihood that an event will occur, giving senior executives insights into the full spectrum of future possibilities, and making it easier to make the right decisions."
The video concludes, "Corridor Budgeting allows businesses to forecast more realistically, and prepare more effectively for what's to come, equipping them to face the future, however it turns out." It's a simple and beautiful explanation of how risk and decision analysis are a central part of business decisions today.
See PwC's Corridor Budgeting video here: