Palisade Corporation
E-Focus: @RISK Aids British Columbia Hydro in Energy Conservation Efforts

In This Issue
What’s New
» @RISK Aids BC Hydro in
   Energy Conservation Efforts

» Palisade Publishes New Book:
   Energy Risk Modeling by
   Prof. Roy Nersesian

» Palisade Featured in American
   Metal Market

» Register for Palisade Risk
   Conferences in Australia –
   Session Programs
   Now Available

» Upcoming Regional Trainings

Case Study
» @RISK and Rudd Asset
   Management Help Turn
   Waste into Energy

@RISK Modeling Tips
» How to Use Geometric Mean
   and Standard Deviation for
   a Lognormal Distribution
   in @RISK

» Finding Conditional Value at
   Risk (CVar) using @RISK

Upcoming Webcasts

In This Issue
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2013 Palisade Risk Conferences
These events include industry experts presenting a selection of real-world case studies, practical software workshops and training classes presented by Palisade trainers, consultants, and software engineers.
» Santiago de Chile: 19 March
» São Paulo: 21 March
» Johannesburg: 25 April
» Tokyo: 14 May
» Shanghai: 16 May
» London: 11 June
» Frankfurt: 13 June
» Brisbane: 27 August
» Perth: 29 August
» Las Vegas: 20-21 November

Regional Seminars
» Asia-Pacific
Adelaide: 21-22 August
Bangkok: 11-12 September
Taipei: 14-15 September
Singapore: 18-19 September
Sydney: 16-17 October
Brisbane: 6-7 November
Perth: 20-21 November
Melbourne: 4-5 December

» Brasil
São Paulo: 19-23 de agosto
São Paulo: 9-13 de setembro

» EMEA & India
Moscow: 11-13 September
London: 17-19 September
Munich: 24-26 September
Milan: 15-17 October
London: 22-24 October
Johannesburg: 29-31 October
Oslo: 12-13 October
London: 26-28 November

» Latin America
Lima: 3-5 de septiembre
Medellín: 10-12 de septiembre
San José: 24-26 de septiembre
Panamá: 1-3 de octubre
Bogotá: 29-31 de octubre
México D.F.: 3-5 de diciembre

» North America
Boston: 13-14 August
Houston:14-16 August**
Chicago: 27-28 August*
Atlanta: 10-12 September
San Francisco: 17-19 September
Montreal: 1-2 October
Dallas: 1-3 October
Chicago: 15-17 October
Washington, DC: 29-30 October
Philadelphia: 5-7 November
Denver: 5-6 November*   
*Project Risk Assessment Seminar
**Special Oil and Gas Seminar

Live Web Training
Project Risk Assessment
using @RISK

18-19 September, 1pm-5pm ET

Decision-Making and Quantitative Risk Analysis using @RISK

31 Oct.- 1 Nov. 1pm-5pm ET

14-15 November 1pm-5pm ET

Decision-Making and
Quantitative Risk Analysis
using the DecisionTools Suite

9-10 December, 9am-1pm ET

19-20 December, 9am-1pm ET


Trial Versions
Palisade software is available
in fully functional trial versions.
Try @RISK or any of our
software today!

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The complete risk and
decision analysis toolkit

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Risk analysis software using Monte Carlo simulation for Excel and Project

Visual decision analysis
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The DecisionTools Suite

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@RISK Aids British Columbia Hydro
in Energy Conservation Efforts

As featured in Risk & Insurance Magazine
British Columbia Hydro is currently asking Canadian regulators for permission to build what would most likely be the last major dam construction project in North America. Risk management issues are more prevalent with big dams than with smaller hydroelectric projects (such as diversion of a portion of a river).

Big dams, according to BC Hydro’s Basil Stumborg, mean “a lot of wear and tear on the equipment with hard ramp ups and downs. But as a power provider, we have to have reliable operations. It is very complex to balance generation with power purchases, at the same time as demand and generating potential.”

As a result, Stumborg adds, “There is a huge incentive for utilities such as BC Hydro to encourage energy conservation. But while the motivation is there, it is often difficult to know whether these ambitious targets can be achieved. We have been using Palisade's risk analysis software @RISK to communicate complex analyses, and have been able to set very aggressive energy conservation goals.”

 » Read the full article in Risk & Insurance magazine
 » More about @RISK
 » More about BC Hydro

Palisade Publishes New Book: Energy Risk Modeling by Professor Roy Nersesian
Growing out of Roy Nersesian’s energy courses he delivers at the School of International and Public Affairs at Columbia University, Energy Risk Modeling is a new, ground-breaking reference for those looking for simulation, decision trees, and optimization techniques for energy applications. The book is loaded with real-life examples that demonstrate how @RISK, PrecisionTree, and Evolver can be used to make better financial decisions within the oil and gas, electricity, and renewable energy industries. Roy Nersesian’s easy-to-read, step-by-step approach makes his techniques accessible to anyone who uses Microsoft Excel. All examples covered in the book are provided in Excel spreadsheets.

A sampling of topics covered include:

  • Modeling payoffs of oil drilling using both PrecisionTree and @RISK
  • Economic analysis of a Liquefied Natural Gas (LNG) export project where uncertain variables (cost of natural gas extraction, cost of liquefaction, cost of transportation, and the price of LNG in the intended foreign market) are modeled and simulated in @RISK.
  • Optimizing an oil refinery to maximize profits and valuing a real option of purchasing a coal-fired plant using Evolver, shown to have a greater predictive efficacy than Excel’s built-in Solver.
  • Modeling solar panel and wind turbine power outputs by factoring cloud cover, temperature, time of day, and wind speed, respectively, while optimizing said uncontrollable energy sources with uncontrollable demand to closely match daily energy demand with power generated.
  • Projecting hydropower output in terms of percent capacity using rainfall, evaporation, and damn leakage as probabilistic variables.
  • And much more

 » Register for a complimentary webcast covering examples from the
    book, given by Roy Nersesian

 » Read more about Energy Risk Modeling

Palisade Featured in American Metal

The steel and metals industry publication American Metal Market recently published a feature story about the adoption of Enterprise Resource Planning processes in the steel industry. ERP can include risk analysis, and the article covered an example of a Palisade clients using @RISK’s Monte Carlo simulation to model the most cost-effective way to shut down blast furnaces.

Using @RISK the steel mill was able to completely reline a furnace with a total outage of 68 days and nine hours, which was within the company’s extremely aggressive 70-day window. Each day of lost production represented significant losses in revenue, so efficiency was very important.

 » Read the full article here

Register for Palisade Risk Conferences in Australia – Session Programs Now Available

Brisbane, August 27, 2013
Perth, August 29, 2013

Attracting nearly 1,000 delegates worldwide so far this year, the Palisade Risk Conferences have become the most important events of the year for quantitative risk and decision analysis. Each event offers real-world case studies from professional users, as well as software training from Palisade experts.

Coming up in August, those in the Asia-Pacific region have the opportunity to explore real-world approaches to risk management problems in construction, engineering, oil and gas, mining, infrastructure, and other fields at the Palisade Risk Conferences in Brisbane and Perth. Hear case studies from companies in these sectors, and benefit from software training and personalized help from Palisade consultants.

 » See the program for Brisbane
 » See the program for Perth

In November, save time for Palisade’s largest Risk Conference of the year over two days in Las Vegas at the beautiful Mandalay Bay Resort and Casino!

 » Learn more about Las Vegas, November 20-21
 » 2013 Palisade Risk Conference Series

Upcoming Regional Trainings
Palisade Training Services show you how to apply @RISK and the DecisionTools Suite to real-life problems, maximizing your software investment. All courses include free materials with dozens of example models.

Register today for a training in your area. We will be visiting the following locations in the upcoming months:

 » View the full schedule here

Case Study
@RISK and Rudd Asset Management Help Turn Waste into Energy
The energy market has been shifting in recent years, ushering in an era where so-called wastes are being re-examined, and the desire for energy security and clean/green energy sources is rising. Rudd Asset Management (RAM), an energy consulting company specializing in cost-effective solutions, recently helped a large horse racing and competition complex that wanted to develop “green” policies that made economic sense. By using Palisade’s DecisionTools Suite, RAM determined that converting stall bedding and manure waste into renewable energy was a feasible, cost-effective solution—helping the complex turn a waste-disposal problem into a profit.

RAM’s methodology for evaluating the project included considerations of IRR (internal rate of return), debt coverage ratio, NPV (net present value), and after-tax cash flows. Assumptions were built using data and expert opinion from all stakeholders. Using @RISK’s sensitivity analysis, key value drivers were identified as well. In the end, a financially viable strategy was created. “Palisade’s DecisionTools Suite is a great tool for our process,” says president Mark Rudd. “We help the client make better decisions quicker, using the power of Monte Carlo simulation.”

 » Read the full case study

Product Spotlight
How to Use Geometric Mean and Standard Deviation for a Lognormal Distribution in @RISK
If you know the desired geometric mean and standard deviation of a lognormal distribution, use RiskLognorm2( ) but set μ to the natural log of the desired geometric mean, and σ to the natural log of the desired geometric standard deviation.
(where X represents the geometric mean and Y the geometric standard deviation)

You can type the function directly in Excel's formula bar, or use @RISK's Define Distribution Window and select Lognorm2 from the Continuous tab. You can then type the LN function right into the boxes in the Define Distribution dialog.

 » Further information on defining lognormal distributions
    with different parameters

 » Download an example illustrating how to define the lognormal
    distribution with different parameters


Finding Conditional Value at Risk (CVar) using @RISK
In finance, the value at risk (usually at the 5% level), or VaR, is a well-known concept. It is the 5th percentile of the distribution of a return. In other words, the return will less than or equal to VaR with probability 5%. However, VaR doesn't tell the whole story. How bad could the return be if it happens to fall below the VaR? To answer this question, another meaure, the conditional value at risk, or CVaR, has been developed. It is the conditional mean return, conditioned on the event that the return is below the VaR.

These example models illustrate how to find the VaR and the CVaR for a portfolio of correlated investments. The output is the portfolio return. When the simulation runs and you "browse" this output, you see the distribution of portfolio return. By default, @RISK adds "sliders" at the 5th and 95th percentiles, so the VaR is directly above the left slider.

To find the CVaR, you can use @RISK's Filter tool. While displaying the Browse Results window for the portfolio return, click the Filter button below the graph and create a "percentile" filter with minimum and maximum percentiles 0% and 5%, respectively. This leads to a graph showing only the outcomes where the portfolio return is below its 5th percentile. Then the mean of this conditional distribution is the CVaR. Alternatively, CVaR can be found without an explicit filter by using the RiskTruncateP property function inside the RiskMean function. This averages only the output values that are below the 5th percentile.

The second spreadsheet builds on the previous example by using RISKOptimizer to find the portfolio weights that maximize the conditional value at risk.

 » Download the models

Introduction to Monte Carlo Simulation & Risk
Analysis using @RISK and RISKOptimizer

Presented by: Andrew Sich
Palisade Corporation
   14 August - 1pm (Eastern Daylight Time)

   » Register Now

Energy Risk Modeling as a Teaching Tool, and Overview of Book
Presented by Roy Nersesian
Monmouth University and Columbia University
   18 September - 11am EDT (Eastern Daylight Time)

Register Now

Introduction a l’analyse des Risques et décisions
avec @RISK et DécisionTools Suite (en français)

Présenté par Manuel Carmona
Palisade Corporation
   24 septembre, 10h, heure d'été

   » Inscrivez-vous maintenant

Introduction to Risk Analysis using
@RISK and the DecisionTools Suite

Presented by Palisade Corporation
   26 September - 10am GMT (Greenwich Mean Time)
  » Register Now
   28 November - 10am GMT (Greenwich Mean Time)   » Register Now

Einführung zur Risiko- & Entscheidungsanalyse mit
@RISK und der DecisionTools Suite (auf Deutsch)

Präsentiert von: Sascha Stange
Palisade Corporation
   15. Oktober 2013 10:00 Uhr (Berlin)

   » Jetzt registrieren

Introducción al análisis de riesgo y decisión con
@RISK y DecisiónTools Suite (en español)

Presentado por: Manuel Carmona
Palisade Corporation
   29 de octubre - 10:00 (CET)

   » Regístrate ahora

Introduction to Risk Registers using @RISK
Presented by: Doug Oldfield
Palisade Corporation
   31 October - 10am (GMT)

   » 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.

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