Abstracts

 

Best Practice Principles for Modelling in Excel and @RISK

Dr Michael Rees, Palisade Corporation

This session aims to highlight some of the key principles that can be applied to create error free and easy to understand models in @RISK and in Excel. The session will cover a range of topics, including model structure, formatting, and sensitivity analysis.

 

Einführung zu der DecisionTools Suite 5.5 (auf Deutsch)

Steve Beeusaert, Regional Sales Manager, Palisade Corporation

Dieser Teil der Veranstaltung findet auf Deutsch statt.

Diese Veranstaltung wird Ihnen die unterschiedlichen Elemente der neuen DecisionTools Suite 5.5 vorführen die umfassende Risikoanalysen, Optimierung, Entscheidungsbaumanalysen sowie fortgeschrittene statistische Analyseverfahren ermöglichen. Anhand von praktischen Beispielen wird die Funktionsweise von @RISK 5.5 auf Deutsch sowie RISKOptimizer, Evolver, PrecisionTree, TopRank, StatTools, und NeuralTools demonstriert.

 

Einführung zu @RISK 5.5 (auf Deutsch)

Steve Beeusaert, Regional Sales Manager, Palisade Corporation

Dieser Teil der Veranstaltung findet auf Deutsch statt.

Das neue @RISK 5.5 wurde komplett ins Deutsche übersetzt. Diese Einführung wird Ihnen die neue Funktionsweise anhand von praktischen Beispielen verdeutlichen.  @RISK 5.5 wurde von Grund auf umgestaltet und bietet jetzt ein intuitiveres Interface, neuen Verteilungsfunktionen, schnellere Simulationen, eine verbesserte Graphikengine mit Überlagerungsmöglichkeiten und neuen Diagrammoptionen wie z.B. Streudiagramme und erweiterte Tornadocharts. Während einer Simulation können Sie nunmehr sehen wie alle Berichte, Thumbnails und Diagramme in Echtzeit aktualisiert werden.

Forecasting Capital Adequacy Ratios
in Financial Institutions

Lionel Slusny

A practical update on capital management for financial institutions, including a case study emphasizing the sensitive variables for capital adequacy. Participants will gain command in the different sorts of capital management models and their ability to integrate new disruptive information. Insight on specific capital management strategies and practices will be delivered through a practical example (live model simulation with @Risk).

Different modules will be reviewed using @Risk software:

  • Variables definition and contingent frameworks for Capital (Tier I, Tier II , Tier III)
  • Risk management and capital allocation
  • Scenario modelling
  • Confidence level for capital adequacy ratios
  • Main variables sensitivity

Main takeaways: Optimum financing strategies & capital levels for financial institutions; Modeling frameworks for capital adequacy; Impact of economic scenarios & crisis

 

Introduction to the DecisionTools Suite 5.0 (English)

Randy Heffernan, Vice President, Palisade Corporation

This session will show you how to use the elements of the new DecisionTools Suite 5.5 as a comprehensive risk analysis, optimisation, and statistical analysis toolkit. We will walk through a continuous example illustrating @RISK, RISKOptimizer, Evolver, PrecisionTree, TopRank, StatTools, and NeuralTools, time permitting.

 

Introduction to @RISK 5.5 (English)

Randy Heffernan, Vice President, Palisade Corporation

This introduction to @RISK 5.5 will walk you through a risk analysis using various example models. Key features of @RISK will be highlighted, and new enhancements in version 5.5 will be pointed out along the way. You will experience the intuitive interface of @RISK 5.5 as you define distributions, compare distributions using overlays, fit distributions to data, and more. During simulation you will be able to see all charts, thumbnails, and reports update in real time. View results using the new graphing engine, Scatter Plots, and Tornado Regression – Mapped Value charts. There’s so much to see, we’ll cover as much as time permits.

 

New Trends and Overview of @RISK 5.5

Randy Heffernan, Vice President, Palisade Corporation

Palisade products @RISK and the DecisionTools Suite are used across a variety of industry sectors. As such, Palisade sees multiple perspectives on risk management through its clients. Randy will briefly review risk management trends that Palisade sees developing across multiple sectors.

He will also give a guided tour of the new @RISK 5.5 for Microsoft Excel. @RISK 5.5 is available in German and brings a number of important new features that improve usability, save time, and enhance Monte Carlo simulation analyses. Interface improvements, new graphs, and simulation archiving are just a few new features in version 5.5.

Operational Hedging in
Global Supply Chain Networks

Prof. Dr. Arnd Huchzermeier

Managing the risk and return of a global supply chain is of paramount importance to managers of multinational firms.  The presentation demonstrates how firms can maximize their global after-tax profit and curtail their downside risk exposure through:

  1. Postponement of operational decisions, e.g., assembly or distribution, and
  2. Switching (back and forth) of production. 

Using real options analysis, optimal investment strategies are developed.  Methods for reducing the overall model complexity and ways of curtailing switching costs are discussed.  Monte-Carlo Simulation using the @Risk software is then utilized in the analysis, i.e., determination of the value-at-risk, of such global operating strategies.  Application case studies in the global automotive (supplier) industry are presented.  The value of these types of real options easily exceeds the annual sales of a firm.

 

Optimisation Modelling using the DecisionTools Suite

Dr Michael Rees, Palisade Corporation

The presentation will look at optimisation within organisations and how problems occur. Dr. Rees will explain some of the common issues and pitfalls to look out for when formulating optimisation models in Excel. He will also examine which of the tools in the DecisionTools Suite are suitable for applying to different optimisation scenarios and will illustrate this with a selection of models.

 

Risk Assessment in the Value Creation Chain of
Electric Energy Production from Lignite based on
Cash Flows Variability Estimation

Leszek Jurdziak, PhD and Justyna Wiktorowicz, MSc.

Currently starting-up production of electricity from new lignite deposits becomes a very risky business. Liberalization and structural changes on electric energy markets as well as EU environmental regulations (e.g. regarding CO2 emissions pricing through emission trading schemes ETS) together with the global financial crisis have worsen the conditions for big investments and increased the area of uncertainty. Such situation requires not only optimization of joint activity of a bilateral monopoly of a mine and a power plant† but also risk analysis in the value creation chain of electric energy production. The new integrated risk evaluation method is described based on the example data of the “Legnica” mine supplying fuel to the nearby power station proposed during the Foresight Project “Scenarios of the Technological Development for the Lignite Mining and Process Industry”. Application of TopRank allowed on identification of key uncertain parameters on every step of the value creation chain from lignite deposit evaluation (resources classification and mineable reserves identification), through designing of the optimal ultimate pit maximizing joint profits of integrated firm and preparation of the optimal schedule of lignite excavation maximizing NPV or stabilizing the lignite quality, up to post mining terrain reclamation. Then several techniques were used to estimate the character and potential distribution of uncertain parameters including: conditional simulations (CS) of equally probably 3D lignite geology models and GeoRisk Assesment (GRA) during optimal scheduling of lignite excavation conducted in Datamine software (Datamine Studio 3 & NPVScheduling v.4) to appraise lignite quality, value and quantity variation in planned areas of excavation and statistical analysis of past costs and electric energy prices variability to forecast their behavior in future. The results of CS and BestFit and chosen distributions and histograms of parameters (e.g. amount and prices of CO2 emission allowances purchased by the power plant) as well as set up correlations were used as inputs in Monte Carlo simulations (MCs) of @Risk model to forecast future cash flows (CFs) variability during electric energy production. Based on revealed during simulations variability of cash flows (CFs) in each year of the optimal long-term excavation schedule (Life of Mine plan) the proper selection of risk adjusted discount rate (RADR) was possible what enabled determination of resulting histogram of NPV of the project. Statistical analysis of simulated CFs and NPV histogram allows on calculation of other non-typical risk measures as probability of loss (not attaining required rate of return), VAR of cash flows at risk (CFaR). There are plans to further develop analysis for taking into account the real option value of the project.


†Jurdziak L., 2007: Economic evaluation of a lignite mine and a power plant operations with application of a bilateral monopoly model, pit optimisation methods and game theory (a monograph in Polish), Oficyna Wydawnicza Politechniki Wroclawskiej p.307.

@RISK Adjustment of the Business Case
for an 18 billion Euro New Power Plant

Frank Lyhne Hansen

Risk Management:
Identification and measurement of risk.
Identification of the value-creating risks.
Hedging of the non-value-creating risks.
Hedging strategies.

Risk management creates value by identifying the risks which create value, by hedging the risk not creating value and by controlling the overall risks of the company.
Traditionally, risk management has been defined defensively, i.e. as a process where undesirable risks were defined, measured and controlled. This was done by transferring the risk to others through insurance, by preventing risk or by keeping sufficient capital to finance losses.

Modern risk management looks more broadly at risk. All types of risks are included and analysed at the same time, no matter who is formally responsible of each single risk. Risk is not necessarily undesirable. Risk is an inevitable consequence of running a profitable business. No risk, no gain. Looking at risk more offensively, the object of risk management can be defined as ensuring that the company is exposed to the risk it wishes and believes that it is exposed to.

Today, risk management is acknowledged as an integrated part of good management and it is one of the recommendations of good Corporate Governance.

The requirements put forward by the authorities on risk management are increasing. The banks should adapt to the new Basel II rules, non-insurance companies should adapt Solvency II and all companies should comply with the increased demands of the accounting standard on reporting of risk.

Presentation
Having the framework of ERM in mind, the presentation will show how a Danish energy company have used @RISK to risk adjust a business case for building an 18 billion Euro power plant in Germany. The analysis was focused on the identification of the risk drivers in the project and how those risk drivers affected the business case. The risk analysis and simulation in @RISK changed some of the initial decisions in the project such as the capital structure of the power plant and the hedging strategy. The analysis has also given some very important input in how to prioritise the controlling of risks in the project and input to the project plan. Liquidity is key in a project like this and the risk model optimises the use and better planning of liquidity.

 

SAP Based Schedule Risk Analysis on
Managed Services & Production Contracts

John Ducker

An examination of an innovative approach to Schedule Risk Analysis on Managed Services Contracts employing statistical techniques on SAP based data sets. Also considered is a comparative analysis with traditional @RISK Monte Carlo, Gantt based schedule analysis techniques. We will see that the methods are complimentary. The SAP-based technique is a very powerful analysis method given a suitable program environment, and the Monte Carlo technique is the only solution available before any measurable results are visible from the project and where revelation of critical path risks is required.

In conclusion schedule based Monte Carlo simulations are always necessary during bidding and design phases of a project. However, in suitable projects where costs and risks are heavily weighted to ‘production’ type activities, the SAP based method offers distinct advantages including the by-products of control parameters and estimation metrics, and should be used in projects of this type. Furthermore, the SAP method offers high visibility of gains from Improvement Opportunities and Risk Mitigations.

 

 


Presenters


 

Stephan Beeusaert
Regional Sales Manager, Palisade Corporation

Stephan Beeusaert, Regional Sales Manager for Palisade Corporation, has been with the company for over 5 years. Stephan holds a BA in international business and economics from the University of Applied Sciences Cologne, Germany. Steve has worked for several multinational corporations in Europe and the US.

 

John Ducker
Senior Risk Manager, EADS Defence & Communications Systems UK

2003 - Present:                  EADS Defence & Communications Systems UK, Senior Risk Manager.
2000 - 2003:                        Tadpole Geospatial Systems, Program Manager.
1993 – 2000:                       Independent Consultant
Before 1993:                      Various Senior Engineering and Representative Roles in the UK MoD and Industry.

Education:                           BSc (Hons) Kent, Computer Science; C.Eng, C.iTP.

Areas of Expertise:

    • 35 years of senior enterprise & project management experience within a broad range of IT, Engineering and Corporate Business Systems.
    • Career specialities in Risk, Project and Program Management; Consultancy and Engineering Audit.
    • Exposure to all aspects of Risk and Project Management in the Defence, Utility and Commercial engineering sectors

Randy Heffernan
Vice President, Palisade Corporation

Randy Heffernan started with Palisade in 1997, and helped the company expand with its first overseas office in Plymouth, England, in 1998. Further geographic expansions included London in 2002 and Sydney, Australia in 2005. He has held a variety of roles in sales, marketing, and management, and currently oversees much of the corporate operations. Randy works closely with the sales staff to understand client needs and liaise with software development. Randy holds a Bachelor of Science degree in Business Management and Marketing from Cornell University.

 

Prof. Dr. Arnd Huchzermeier

Prof. Dr. Arnd Huchzermeier is the Chair in Production Management of the WHU - Otto Beisheim School of Management in Vallendar near Koblenz, Germany.  In 1986, he received a Masters Degree in Business Administration as well as Mechanical Engineering, Computer Science and Operations Research from the Technical University of Karlsruhe, Germany.  In 1991, he received a Ph.D. degree in Operations Management from the Wharton School of the University of Pennsylvania, U.S.A., and has frequently taught MBA courses and executive seminars at IESE Business School of the University of Navarra, Spain; INSEAD, France; TIAS Business School, The Netherlands and Hungary; the Graduate School of Business of the University of Chicago, U.S.A.; the Wharton School of the University of Pennsylvania, U.S.A.; the University of Western Ontario, Canada; the Vienna University of Economics and Business Administration, Austria; and the Leipzig Graduate School of Management / HHL, Germany.  At the WHU, he teaches in the MBA Program of Carnegie-Mellon-University, the Kellogg-WHU Executive MBA Program and Metro’s executive training programs.  Among others, he is Member of the Board of ECR Europe’s International Commerce Institute, Belgium; Academic Director of the German industry competition ‚Best Factory / Industrial Excellence Award‘ (joint with the journal Wirtschaftswoche and INSEAD, France) and Associate of the Real Options Group, U.S.A.

His research interests include real options for R&D projects and the evaluation of start-up ventures, e-trading platforms for options on non-storable products / services; product bundling and pricing strategies; optimization of direct mailing programs; supply chain management and optimization; management models for Management Quality / Industrial Excellence as well as coordination approaches between retailers and manufacturers with a strong focus on promotion planning and store performance optimization.

Prof. Dr. Arnd Huchzermeier has published in leading international academic journals, e.g., Columbia Journal of World Business, Concurrent Engineering: Research and Applications, ECR Journal, European Journal of Operational Research, European Management Journal, Interfaces, International Commerce Review (formerly ECR Journal), Management Science, Manufacturing & Service Operations Management, Marketing Science, Operations Research, OR Spectrum and the Zeitschrift für Betriebswirtschaft.  His research on the Euro introduction was featured, among numerous print media and live television / radio appearances, on the front pages of Financial Times and the Wall Street Journal Europe.  He has published two books on Industrial Excellence and is preparing a book on Real Option Evaluation.  Presently, he acts as Associate Editor of Management Science and Production and Operations Management as well as Executive Editor of the International Commerce Review.

In 2000, Prof. Dr. Arnd Huchzermeier was awarded the Mercurius Award by Fedis, the European Federation of Distribution Societies, Belgium, for his research on the Euro introduction.  In 2002, he received the Franz Edelman Finalist Award from the Institute for Operations Research and Management Science / INFORMS, U.S.A.  In 2003, he won both the ISMS Practice Prize from the Marketing Science Institute, U.S.A. and the Management Science Strategic Innovation Prize from the European Associations of Operational Research Societies / EURO, Belgium. In 2009, he was awarded the ECCH Case Award in the category Production and Operations Management.

 

Frank Lyhne Hansen

Frank is leader of the economic and financial modelling team in Enterprise Risk Management. He is experienced both within the financial and non-financial sector and is a member of the PwC steering board on Solvency II. Frank is a specialist in Solvency II, Basel II and economic capital. 

Frank has extensive experience in operational, financial and strategic risk management. This includes the development, description and analysis of models as well as implementation, discussion and elaboration of economic models for the total economic optimization and preparation of management reporting.

Frank has served as project and program manager on several major projects both in Denmark and abroad. In addition, Frank has a long experience of teaching as an associate professor on CBS (financial) where he teaches risk management. Frank has taught at CBS since 1996 and has a large network and extensive experience in teaching in risk management, statistics and finance.

 

Leszek Jurdziak, PhD

University Studies

  1. 1996 PhD at Wroclaw University of Technology (WTU) in technical science,
  2. 1988 – MSc in mining at Mining Faculty at WTU,
  3. 1982 – MSc in applied mathematics at the Faculty of Fundamental Problems of Science at WTU (the 2nd award in application of mathematics)

Training
postgraduate studies Pedagogic of Higher Schools (1989), The School of Business (1992), Program For Entrepreneurship Education in Central Europe (1992), modeling 3D surfaces in program MOSS (1992), 3D geology modeling and mine design in program Datamine (1993), International Trade (1996), Valuation of Mineral Projects and Investments (2000), Orebody Uncertainty, Risk Assessment and Profitability in: Recoverable Reserves, Ore Selection and Mine Planning (2000), Finance and quality optimisation methods in opencast lignite mines using NPVScheduler (2003), Qualitative Risk Management (2007), Migration of lignite deposits modeling and mine design to Datamine Studio 3 environment and Conditional simulation and risk analysis of investments in lignite mining in Datamine Studio 3 and NPVScheduler 4 (2007).

CURRENT EMPLOYMENT AND EXPERIENCE
  1. assistant professor in the Faculty of Geoengineering, Mining and Geology at the Wroclaw University of Technology (WUT),
  2. lecturer in "The Polish-American School of Business" at the Wroclaw and Cracow University of Technology,
  3. industrial trainings in: the "Turów" lignite surface mine (1987), the "Rydultowy" hard coal underground mine (1988) and the Institute of Business Studies at Central Connecticut State University (1993).
SIGNIFICANT PUBLICATIONS

The author and the co-author of over 130 academic publications (incl. 20 in English) and one monograph “Economic analysis of a lignite surface mine and a power plant operations with application of the bilateral monopoly model, pit optimization technique and game theory” published in Polish in 2007.

  1. Jurdziak L., 2008: Optimisation of joint activity of a lignite surface mine and a power plant as a bilateral monopoly. IVth Int. Conf. COAL. Beograd, 15-18 October, p.208-220,
  2. Jurdziak L., 2008: Bilateral monopoly of a lignite mine and a power plant in the short run. Proceedings of The 21st World Mining Congress, 7-10 IX 2008, Kraków-Bełchatów,
  3. Jurdziak L., 2008: Benefits of vertical integration of lignite mines and power plants. Bridging energy supply and demand: logistics, competition and environment. 31st Conference of the International Association for Energy Economics. IAEE'08. Istanbul, Turkey, 18-20 June,
  4. Jurdziak L., Kawalec W., 2008: Method of identification of mineable lignite reserves in the bilateral monopoly of an open pit and a power plant. Economic evaluation and risk analysis of mineral projects. Taylor and Francis, s. 85-94,
  5. Jurdziak L., 2008: Inherent conflict of individual and group rationality in relations of a lignite mine and a power plant. Economic evaluation and risk analysis of mineral projects. Taylor and Francis, s. 73-83,
  6. Jurdziak L., 2008: Application of extreme value theory for joint dimensioning of BWEs and long distance belt conveyors in lignite mines. Bulk Europe 2008. Prague, Czech Republic,
  7. Jurdziak L., 2006: Lignite price negotiation between opencast mine and power plant as a two-stage, two-person, cooperative, non-zero sum game. International Symposium Continuous Surface Mining ISCSM’06 in Aachen, September.
ADDITIONAL INFORMATION

A member of: European Economic Association (EEA), International Association for Energy Economics (IAEE), International Association for Mathematical Geosciences (IAMG), Polish Association of Mineral Asset Valuators and Association of Risk Management POLRISK.

 

Dr Michael Rees

Michael has 20 years’ of business and finance experience, including roles such as Principal (Partner) at the strategy consultants Mercer Management Consulting (now Oliver Wyman) and Vice-President of Equity Research at J.P. Morgan. He has worked independently for 8 years, for 6 of which he was retained by Palisade Corporation to act as their Director of Training and Consulting. He is the author of Financial Modelling in Practice: A Concise Guide for intermediate and Advanced Level, John Wiley & Sons, 2008).


His academic credentials include a Doctorate in Mathematical Modelling and Numerical Algorithms, and a B.A. with First Class Honours in Mathematics, both from Oxford University. He has an MBA with Distinction from INSEAD in France, as well as holding the Wilmott Certificate of Quantitative Finance, where he graduated top of the course for class work and also received the Wilmott Award for the highest final exam mark. Michael is based in the UK and speaks fluent French and German.

 

Lionel Slusny

2008 - Present:                  Equinox Consulting, Senior Consultant
2006 - 2007:                        Oliver Wyman, Consultant for the Finance & Risk practice
2004 - 2005:                        NIB Capital, Risk management

Education:                           Msc. Finance & Engineering; Solvay Business School (Belgium) & CASS Business School - City University

Areas of expertise

- Derivatives operations & Risk management
- Regulation - Supervisory Processes
- Credit Early Warning Systems
- Capital Management

 

Justyna Wiktorowicz, MSc.

University studies
  1. Since 2006 PhD Student in the Faculty of Geoengineering, Mining and Geology at Wroclaw University of Technology (WTU),
  2. 2006-2009 Bachelor Student in the Faculty of Finance and Banking at Wroclaw School of Banking,
  3. 2001-2006 MSc student in the Faculty of Geoengineering, Mining and Geology at Wroclaw University of Technology (distinction, the best graduate of the year)

Training Courses

  1. III 2009 - Risk management in projects, Wroclaw, AltKom
  2. VIII 2008 - Finances and Insurance, Wroclaw, ING S.A.
CURRENT EMPLOYMENT AND EXPERIENCE
  1. PhD student in the Faculty of Geoengineering, Mining and Geology at Wroclaw University of Technology (since X 2006)
  2. participation in the research project "Economic analysis of a lignite mine and a power plant operation in condition of uncertainty” (N524 010 32/2086), since 2008,
  3. participation in the Foresight Project (WKP_1/1.4.5/2/2006/4/7/585/2006) as an independent junior specialist in mining economics, Institute of Mining Engineering, Wroclaw University of Technology (II 2007– V 2008).
SIGNIFICANT PUBLICATIONS

The author and the co-author of 10 academic publications (7 in Polish and 3 in English).

  1. Jurdziak L., Wiktorowicz J., 2008: Influence of uncertainty related to the CO2 emission restrictions on profitability of production of electric energy out of lignite, IV Int. Conference Coal in Belgrad,
  2. Jurdziak L., Wiktorowicz J., 2008: Risk analysis during evaluation of profitability of energy production from lignite, IAEE Conference in Istanbul, Turkey,
  3. Wiktorowicz J., 2008: Obszary ryzyka zakładu górniczego i skojarzonej elektrowni (The risk of mine and associated Power plant) IX Konferencja Naukowa Doktorantów, Szklarska Poręba,
  4. Jurdziak L.,Wiktorowicz J., 2008: Conditional and Monte Carlo simulation-the tools for risk identification in mining projects, Economic evaluation and risk analysis of mineral projects,Taylor and Francis,
  5. Jurdziak L.,Wiktorowicz J., 2008: Identyfikacja czynników ryzyka w bilateralnym monopolu kopalni i elektrowni (Identification of risk factors in a bilateral monopoly of a mine and a power plant) Górnictwo i Geologia X, Oficyna Wydawnicza Pol.Wroc.,
  6. Jurdziak L., Wiktorowicz J., 2007: Elementy analizy ryzyka przy ocenie opłacalności produkcji energii elektrycznej z węgla brunatnego (Elements of risk analysis during evaluation of profitability of energy production from lignite), Gospodarka Surowcami Mineralnymi, T.23- z.spec., Kraków.
AWARDS
  1. PhD scholarship from the Ministry of Science and Higher Education at the WTU,
  2. Special scholarship Project GRANT from the Marshall of the Dolnośląskie voievodship.
ADDITIONAL INFORMATION

Member of:

  1. organizing committee of the PhD students conference (since 2008),
  2. International Association for Energy Economics (IAEE – since 2008), 
  3. Polish Association of Mining Engineers and Technicians SITG (since 2007),
  4. association of students research GIS (2003-2005),
  5. VI 2008 student scholarship IAEE Conference Turkey 2008

Participation in national and international conferences (New Build Europe 2008, IMF 2008, IAEE’2008)

    • Active driving licence of the B category