Month: July 2015

Costs of Australian Carbon Tax: @RISK Evaluates the Profitability of Dairy Systems

UniversityMelbourne-1In Australia, a carbon tax is one of the key policy tools that the government plans to use to curtail greenhouse gas emissions in the private sector—however, there has been little research looking into the effects of a carbon tax on Australia dairy farm operations. Dr. Şeyda Özkan, who was working with the Department of Agriculture and Food Systems at the University of Melbourne, Australia, at the time, evaluated how this new policy would affect dairy operations using two different systems for feeding their cattle—a traditional ryegrass pasture system, and a complementary forage-based system, which involves a rotational sequence of two forage crops per year. Using @RISK, Dr. Özkan evaluated the financial performance of these two feeding systems—specifically looking at the two dairy systems’ operating profit for a single year. The results showed that a carbon tax caused losses in both feeding systems, and that both feeding systems’ profitability were most affected by milk price and the price of feed.  Overall,  the complementary forage-based feeding system was more likely to guarantee an operating profit of $200,000 under a carbon tax, but  posed larger risks of financial loss—making it a ‘high-risk and high-reward’ option. “One of the advantages of the @RISK software is that it can iterate thousands of scenarios in just seconds, depending on the complexity of the model and the number of parameters examined,” says Dr. Özkan. Her favorite features of the software include the BestFit, “for saving time and energy to find the best distribution,” and the probability distribution functions “for easily determining which of the two options dominates the other.” Read the full case study here.

Best practices in risk and decision analysis, FREE New York regional conference – 4th August

Join Industry Leaders and Software Experts
Palisade invites you to an intensive 1-day conference in New York on the 4th August, 2015.

This is a “must attend” event for professionals dealing with risk in any industry. 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. The programme will also include practical software 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 modelling and analysis more accessible – and powerful – than ever.

This event it is free to attend and promises to be an invaluable opportunity for broadening one’s knowledge of risk modelling, and networking with decision-making professionals in a range of industries.

More information on the event can be found here along with registration details.

We look forward to meeting you!


THURSDAY July 23rd Webinar: “Injecting Certainty into an Uncertain Process: Using Monte Carlo Simulation to improve your Forecast Processes”

Thursday, July 23rd, 2pm EDT / 6pm GMT
Presenter: Jerry Scherer, JB Scherer Consulting Group LLC

» Free registration

FENG and Palisade invite you to join us in a webinar designed to improve your forecasting process and give your company improved insights into what “success” means to your company.

As many companies have discovered forecasting the future is fraught with many uncertainties:

  • Profitability – how best to estimate future demand, prices and costs for goods and services?
  • Liquidity – Is my company over borrowed, under invested or over exposed?
  • Risk – what happens if market rates (interest, currency, commodity) change or my banking partners impose conditions which jeopardize access to external sources of funds?

In addition, a reliance on forecasting tools like accounting systems and spreadsheets injects another level of uncertainty into the forecasting process, namely the probability of error or inability to integrate multiple sets of future outputs based on disparate sets of assumptions. After all ERP systems were designed to record historical events with accounting like certainty; however, the common denominator in any forecast is that its results will certainly be uncertain when compared to actual results.

In this webinar we will discuss the use of a statistical technique called Monte Carlo simulation which uses probability distributions to estimate a range over which certain events or outcomes will / will not occur. By combining the business experience of your production and finance staff with this statistical technique you will be better able to see which outcomes are most probable.

Whether your business is in manufacturing, service, warehousing, distribution or finance, this webinar will enlighten you as to a new way in which to inject certainty into an uncertain process.

» Free registration

Leading construction firm uses @RISK to model complex risk problems

Murray MurrayRoberts& Roberts uses @RISK to evaluate a cash flow based approach to enterprise risk management (ERM)

In a sector that faces many risks, engineering and construction services company Murray & Roberts takes a cash flow based approach to enterprise risk management (ERM). Using @RISK from Palisade enables it to simulate the risk scenarios identified in order to advise on the most effective mitigation strategies and controls. Murray & Roberts ( ) is a leading engineering and construction services company in South Africa and is recognised as an international engineering and construction group.

The engineering and construction industry faces various high risk scenarios, including a combination of negative markets, protracted strike action with labour unions unable to reach settlements amicably, loss of life due to poor safety standards, and delays and cost-overruns on major projects. If these risks are not understood and managed, stakeholders could face significant losses.

Most organisations in the industry undertake some form of ERM, based on best practices such as the ISO31000 framework. However, many still only take a qualitative approach. This is for a variety of reasons including a lack of the required level of technical knowledge, the belief that intuition provides adequate insight, and a tendency to avoid complex mathematical issues.

To combat this, Murray & Roberts is evaluating a more quantitative approach that links risk exposures to company value by way of cash flows. The company uses enterprise discounted cash flow (DCF) and discounted economic profit (EVA) as the valuation technique for company value. This measurement approach was selected as it relies exclusively on the flow of cash in and out of the organisation, the method preferred by investment houses and analysts, rather than on accounting-based contributions.

The risk problem is simulated using @RISK, which allows the simulation to be adjusted to account for interdependencies and correlations between risks.

Sean de la Rosa, project and enterprise risk manager of the Power & Water Platform at Murray & Roberts, says: “@RISK offers the powerful simulation capability that is required to model complex risk problems. Despite this, the simulations are relatively easy to perform and require minimal in-depth mathematical expertise.”

A full version of the case study can be found here:

Lessons from Oil and Chemical Case Studies: How to Build Accurate and Decision-Focused @RISK Models

Huybert Groenendaal, a managing partner at EpiX Analytics, discusses how to build accurate and effective @RISK models to help make strong decisions. He talks about what type distribution to choose, whether to include correlations, and how to present results in a way that supports decisions–all of which are incredibly powerful skills to have, especially paired with Palisade’s @RISK. Watch below to learn some of the basics of @RISK and how it can be used in various practical and helpful ways.

See more case studies here.

Check out live webcasts here.