IT Business Edge, on online business publication recently published a piece by Palisade Vice President Randy Heffernan titled “Using Monte Carlo Simulations for Disaster Preparedness,” a slideshow featuring key tips on how to apply this statistical method to planning for extreme weather events.
As the article states, “the U.S. National Research Council recently suggested the necessity of a “national vision” that will take precautionary, rather than reactionary, approaches to flooding, particularly in the Atlantic and Gulf coasts, where water has reached flood levels an average of 20 days per year since 2001.”
As an expert in quantitative risk analysis, Heffernan had some tips for handling the key problems businesses face around climate change risk planning, including:
- Conducting cost predictions around climate change
- Timing of investments in mitigation measures
- Accounting for hidden costs caused by extreme weather
- How to plan for extremely rare risks
- Accounting for impact, not just probability
- How to handle uncertainty around adopting renewables
- How to model not just your risk, but your response, to climate change disaster
Fundamentally, all these tips are anchored by the application of Monte Carlo simulation, which, the article explains, “performs risk analysis by building models of possible results by substituting a range of values — a probability distribution — for any factor that has inherent uncertainty. It then calculates results over and over using a different set of random values from the probability functions.”
Want to make sure your business is better prepared for extreme weather? Check out the full article here, and check out @RISK, the Monte Carlo simulation software that makes planning for climate change events possible.
