Black & Veatch uses @RISK to
Model Project Contingencies
As presented by Lyle Hervert at the Palisade Risk
Conference Las Vegas, November 10, 2011

Black & Veatch Corporation is a leading global engineering, consulting and construction company with more than 100 offices worldwide.

As a company involved in the design and execution of hundreds of major capital construction projects, Black & Veatch is acutely aware of the impact of risk factors on the bottom line. Some risk factors are so significant and probable that funds must be held in reserve to protect the company from catastrophic losses. Other risks are less significant and/or have sufficiently low probability that reserving a percentage of the potential loss will offer enough protection.

The “art” is to understand the balance between adding in reserve funds for risk protection and not adding reserve funds for a competitive advantage in the bidding process. Until 2009, Black & Veatch struggled with anticipating and reacting to potential risks and market influences which tended to behave cyclically. As events such as weather, labor shortages, supplier interruptions and the like occurred, company management tended to increase contingency risk funding into project proposals. Over succeeding years, business was lost due to this increase and, as a result, the reserves were reduced to a point that losses increased from the impact of risk events and the cycle began again.

Through the application of risk modeling, including Monte Carlo analysis using @RISK, Black & Veatch has been able to better understand and predict the probability of the various risk factors. The increased accuracy and precision of the risk estimate has benefitted the company by improving the competitiveness of proposals while simultaneously protecting profits by appropriate reaction to identified risks. All major construction projects are now assessed using this model with senior executive review.

 » Download the full presentation
 » More about Black & Veatch

DecisionTools Suite 6.0 Beta Now Available
You may now download the beta release of the new DecisionTools Suite 6.0. The DecisionTools Suite 6.0 offers new versions of @RISK, PrecisionTree, TopRank, NeuralTools, StatTools, RISKOptimizer and Evolver.

Some key features of new @RISK 6.0 are integration with Microsoft Project, improved graphs, better distribution fitting, and more. Other important new improvements in the Suite are Bayesian revision in PrecisionTree, the new OptQuest optimization engine in RISKOptimizer and Evolver, sensitivity analysis in NeuralTools, and scatter plot matrices in StatTools. There are many more enhancements, so we encourage you to take a look!

As a current Palisade software user, we would like to invite you to test new version 6.0 and send us your feedback. Your input will be help us improve version 6.0 as we prepare the final release. Please click the link below to download the DecisionTools Suite 6.0 beta:

 » http://www.palisade.com/Beta/Suite6/

The DecisionTools Suite Beta can be installed on the same system as a licensed copy of version 5.x of the DecisionTools Suite or @RISK. Both versions install to different directories and launch from separate icons. You cannot run both version 6 and 5.x in the same session of Excel; when running one version, exit Excel before launching the other version.

This Beta version expires on March 31, 2012.

 » See what’s new in DecisionTools Suite 6.0
 » Download the beta version of DecisionTools Suite 6.0

Participate in Aberdeen Research’s Financial Planning, Budgeting, and Forecasting Survey
Aberdeen Research, a leading provider of research and analysis of information technology companies, is conducting an important new survey on the financial planning practices of best-in-class companies. The results of the survey will inform a number of research reports, including the new Risk-Adjusted Strategies to Enable Financial Accuracy report. Be a part of this research and you can receive complimentary access to the full benchmark report as soon as it is published (a $399 value).

Planning, budgeting and forecasting lay the foundation for any effective business plan, but economic uncertainty can make it difficult to set clear goals and objectives. During volatile economic times, this is more critical than ever for success and survival. By participating in this brief 10-minute survey, you will be able to see how your experiences in financial planning, budgeting, and forecasting compare with those of your peers, benchmark your performance, and see how you can achieve best-in-class results. The tendency of businesses in this current climate is simply to clamp down on expenses. In doing so, the potential for missed or lost opportunity increases. This study will provide a roadmap for organizations trying to improve their planning, budgeting and forecast processes so as not to miss out on these opportunities. Your participation is a vital part of the report development, and serves as the foundation of Aberdeen's research.

Individual responses will be kept strictly confidential, and data will only be used in aggregate.

 » Fill out the survey
 » More about Aberdeen Group

Palisade Risk Conference Sydney:
Save the Date – 29-30 May
The 2012 Palisade Risk Conference will be held at the fantastic Hilton Sydney located in the heart of the city.

Present Your Case Study in Sydney
If you have an interesting application of Palisade software which you would like to present, please send a short abstract to Jami Adams, at jadams@palisade.com. The closing date for abstracts to be submitted is January 30, 2012. If you would like to submit an abstract but need more time, please let us know.

All presenters attend the conference and social events at no charge.

» Conference overview
» View our previous Sydney conference schedule and presentations

Community Services Provider Arc of
Yates utilizes Palisade’s @RISK to
Predict Potential Budget Shortfalls
Arc of Yates County, New York provides services for people in the community with developmental disabilities. The organization was facing funding shortfalls from state and local governments, and turned to Palisade’s @RISK to manage and mitigate these risks. Through their use of @RISK, Arc of Yates has been able to develop more effective strategic contingency plans and communicate their challenges to board members and other stakeholders.

“The greatest benefit has been reducing a number of significant uncertainties down to a single output that provides our senior leadership and board of directors with a realistic expected outcome,” said Stephen Johnson. Arc of Yates CFO. “Comparing the two outlying years in our three-year strategic financial plan has also provided advance warning that the next two years will be financially challenging. As a result, we have re-prioritized capital projects for 2011-2013 and will need to work more collaboratively with other similar agencies to reduce overhead and administrative expense.”

 » Read the full case study

Managing Risk in a Loan Portfolio
This example was excerpted from the book @RISK Bank Credit Analysis by Roy Nersesian, published by Palisade

RISKOptimizer in @RISK Industrial can be used to maximize the profit of a loan portfolio given uncertainty surrounding potential losses. You can use optimization and simulation to account for the risk in various loans and see the effect on the portfolio at large.

Suppose a bank borrows money from its depositors and other sources at an average rate of 4.5%. The bank has seven investment grades for loans whereby interest rates rise to reflect the underlying risk. As loan creditworthiness declines, the expected loss probability rises along with the degree of loss.

Moreover there is a specific loan reserve associated with each grade of loan.

The bank has $100 million in capital. What is the optimal allocation of capital to maximize profits?

 » Download the complete chapter and example spreadsheet
 » Learn more about @RISK Bank Credit Analysis by Roy Nersesian

How Capable are Your Capability Metrics?
Using @RISK to Demonstrate Their Limitations
Presented by Rick Haynes, Smarter Solutions, Inc.
February 16, 2012, Noon-1pm (ET) » Register Now

» See complete Webcast schedule

The Global Leader in Risk and Decision Analysis
Palisade Corporation is the world’s leading provider of risk and decision analysis software and solutions. Founded in 1984, its products @RISK and the DecisionTools Suite are used by over 95% of the Fortune 100, in nearly every industry around the world. Palisade is headquartered in New York State, and has offices in London, Sydney, Rio de Janeiro, and Tokyo.