Visual Reporting Use Palisade’s @RISK to Help Danish Government Assess Risk in Major IT Projects
- Industry: Government, Project Management
- Product(s): @RISK
- Application: Risk assessment of major IT projects
Visual Reporting used @RISK to help the Danish Government comply with newly formed Danish legislation which requires that all Government related IT business cases that exceed €1.33m are to be risk assessed.
Applying Monte Carlo simulation within the application allows users at the Danish Government to get a well formed output of the overall risk of running the project. This capability is an invaluable part of @RISK.Laurits Søgaard Nielsen, CEO, Visual Reporting
Using Palisade’s @RISK, Visual Reporting has helped the Danish Government comply with newly formed Danish legislation which requires that all Government related IT business cases that exceed €1.33m are to be risk assessed. Originating from a model created by the Danish Ministry of Finance and now the Agency for Digitisation, Visual Reporting has developed an advanced Excel-based analytical spreadsheet with @RISK at its core. The spreadsheet allows individuals to enter the variation of each business case assumption, and helps assess the monetary risk associated with large scale IT projects.
Based in Denmark, Visual Reporting develops analytical reporting and software solutions for organisations looking to understand the risk associated with certain activities. Visual Reporting has used Palisade’s @RISK within its Danish Government spreadsheet application, and is integrating it into other project risk models.
Working at first with the Danish Ministry of Finance, Visual Reporting was tasked with developing a software solution that would enable the Danish Government to abide by recent legislation that insisted all IT-based projects with a project cost of over €1.33m be risk assessed. For example, a municipality may propose to update the electronic traffic system, or government employee database records. After realising that the measurement of risk in existing business cases was insufficient, the new legislation was passed to ensure not only the monetary costs and benefits of a project were evaluated, but also the risk associated with these numbers.
Danish Government manages risk more successfully
The new business case software model for the Danish Government now integrates all the aspects required to build a solid business case that takes every aspect of the risk associated into account. It helps users within the organisation input data in a structured and well formed manner, as well as standardising the output for the management team so that business cases from all branches of the Danish Government can be easily compared.
Monte Carlo Simulation fundamental to risk assessment
Laurits Søgaard Nielsen, CEO at Visual Reporting, believes Monte Carlo Simulation (MCS) used within @RISK has been integral to the solution that Visual Reporting has implemented for the Danish Government. An analytical technique that evaluates and measures the risk associated with any given venture or project, MCS is a computerised mathematical process that allows users to define uncertain variables in their models and see, as a result, a range of possible outcomes and the probabilities they will occur. It can show the extreme possibilities – outcomes for the most risky and the most conservative – along with everything in between.
He comments, “Applying MCS within the application allows users at the Danish Government to get a well formed output of the overall risk of running the project. This capability is an invaluable part of @RISK. Using the assumptions of project cost and benefits to operations, we have been able to model what risk is associated within each business case – with the help of three point estimates and structured data entry. The output graphs of primary interest include Net Present Value (NPV), which shows the discounted net present value of a project, and the project costs. Both graphs show the distribution of values and thereby give a high degree of valuable information.”
Understanding uncertainties in business cases across all industries
Nielsen believes the methodology behind assessing the risk in business projects needs to be re-evaluated across enterprises in all industries. “The Danish Government’s application is a key example of how businesses can do more to evaluate every aspect of a project and manage the risk more effectively. The methodology that most enterprises apply today is to evaluate only how much the project will cost, the benefits it will deliver and the value of that benefit in running the project – all using a single point estimate. However, using just single point estimates completely misses out the spread of the risk of running a project. Allowing people to assess the variation of each assumption entered, offers a far more compelling insight into the risk associated with the success or failure of a project.”
The concept of risk analysis and management has been around for many years, but still is not well executed within many industries. Today, organisations are focusing on methodologies that can help them assess the risks more accurately. By exploring the full space of possible outcomes for a given situation, effective risk analysis can both identify pitfalls and uncover new opportunities. Instead of taking a siloed approach to managing risk, organisations can address risk holistically.
Visual Reporting advocates conducting risk analysis with a uniform template across an organisation as a best practice in the management of business cases. The successful implementation at the Danish Government offers interesting insights into how, with the help of Palisade’s @RISK, organisations can gain maximum value and understanding of the level of risk associated with any business case, which can then be reviewed and understood across an organisation.