In This Issue
What’s New

» Chartered Accountants Cite
   Lack of Risk Management as
   Key Cause of Credit Crunch

» @RISK at Lean Six Sigma
   Process Summit

» Energierisiko Konferenz
» Palisade Blog Headlines
» Upcoming Webcast

Case Studies
» At Cummins, Inc., @RISK is
   Standard for Six Sigma

@RISK Modeling Tips
» AssetPrice Random Walks
   and Options Valuation

What's New in @RISK 5.0
» Drag and Drop Graphs

@RISK Function
of the Month

» The Weibull Distribution

Palisade Analytics
in the Press

» Climate Change
» Geophysics
» Medical Insurance
» Online Retailing
» Robotics

» Palisade User Forums

In This Issue
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Palisade Energy Risk Analysis Forum
A one-day forum covering risk and decision analysis from all angles specific to the energy sector.

Houston 21 May 2009

» Register Now for the
   Energy Forum

Palisade Energy Risk Analysis Forum
Oestrich-Winkel 5. Februar 09

» Bitte senden Sie
   Ihre Antwort an

Regional Seminars
» Europe
London: 27-28 Jan 09
London: 27-29 Jan 09
London: 10-11 March 09
London: 10-12 March 09

» Africa
Johannesburg: 18-19 Mar 09
Johannesburg: 18-20 Mar 09

» Latinoamérica
   (en español)
Distrito Federal, México:
   26-28 enero 09
Montevideo, Uruguay:
   9-11 febrero 09
Villahermosa, México:
   24-26 febrero 09
Santiago, Chile:
   25-27 marzo 09
Medellín, Colombia:
   27-29 abril 09

» North America
San Diego: 20-21 Jan 09
Bermuda: 4-5 Feb 09
Houston: 10-12 Feb 09
Morgantown, WV: 24-25 Feb
Ithaca: 11-12 Mar 09
Phoenix: 17-18 Mar 09
Ottawa: 24-26 Mar 09
Washington DC: 7-8 Apr 09
Chicago: 27-29 Apr 09
Calgary: 5-6 May 09
Houston: 20 May 09
New York: 19-21 May 09
Toronto: 2-3 June 09
San Francisco: 16-18 June 09
Ithaca: 24-25 June 09

Live Web Training
» Risk and Decision Assessment Training
using @RISK 5.0
Part I

17-18 Feb 09, 11am-3pm ET
24-25 March 09, 11am-3pm ET
13-14 April 09, 9am-1pm ET
11-12 May 09, 9am-1pm ET
8-9 June 09, 9am-1pm ET

Part II
24-25 Feb 09, 11am-3pm ET
31 Mar-1 Apr, 11am-3pm ET
16-17 April 09, 9am-1pm ET
14-15 May 09, 9am-1pm ET

» Quantitative Project Risk Analysis using @RISK for Project: One Day Course (8023/AACEI One)
18 February 09, 9am-1pm ET

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

The DecisionTools Suite
The complete risk and
decision analysis toolkit

The world's most widely
used risk analysis tool
@RISK» @RISK for Excel
@RISK» @RISK for Project
@RISK» @RISK for Six Sigma

Visual decision analysis
for spreadsheets

Sophisticated neural networks for spreadsheets

Advanced statistical analysis for spreadsheets

The Innovative Optimizer
for Windows

The DecisionTools Suite

Lack of Risk Management Key Cause of Credit Crunch - e-focus

What's New
Lack of Risk Management Cited as
Key Cause of Credit Crunch

In a recent policy paper, the Association of Chartered Certified Accountants (ACCA) named the “failure of institutions to appreciate and manage the inter-connection between the risks inherent in their business activities” as a key factor that led to the credit crisis. The paper goes on to list the lack of influence of risk management departments and weakness in risk reporting as additional primary factors. According to the ACCA, “[Senior managers] did not understand the risks and were using risk assessment with tools which were inappropriate.”

As the global recession deepens, the ACCA paper underscores the growing emphasis on risk analysis in financial institutions and all businesses. @RISK and DecisionTools Suite software is specifically designed for risk analysis using Monte Carlo simulation and other techniques which can show virtually all possible outcomes, however unlikely. In today’s current economic climate, objective quantitative analysis of all risks cannot be overlooked.

Read the policy paper "Climbing out of the Credit Crunch"
» Learn more about DecisionTools Suite
» Learn more about risk analysis

See @RISK at the 10th Annual Lean Six Sigma & Process Improvement Summit
January 19-22, Orlando
Stop by the Palisade booth and see how @RISK can improve your Six Sigma, DFSS, Lean and other processes.

» More on the Summit

Palisade Energierisikomanagement Konferenz
5. Februar 2009, Schloss Reichartshausen
Das Strategic Finance Institute an der European Business School Oestrich-Winkel freut sich, Sie am 5. Februar 2009 zur Energierisikomanagement Konferenz an die European Business School einzuladen.

Im Mittelpunkt steht die Frage, wie sich Risiken auf die Ertragslage eines Unternehmens auswirken. Energieunternehmen sind im Gegensatz zu reinen Finanzdienstleistern mit zusätzlichen Unwägbarkeiten konfrontiert. Häufig sind operative Cash Flows sowohl von Markt- als auch von Rohstoffpreisrisiken abhängig.

Die Konferenz bietet eine ideale Plattform, diese Fragestellungen anhand hochinteressanter Beiträge prominenter Vertreter aus dem akademischen wie auch aus dem praxisnahen Umfeld zu beantworten und die Thematik ausführlich zu diskutieren.

Bitte senden Sie Ihre Antwort an

» Energierisikomanagement Konferenz

Palisade Blog Headlines
Value-at-Risk in the New York Times
Thursday, January 8, 2009
The best-laid plans are… subject to change. An article by Joe Nocera in this week's New York Times Magazine causes me to put on the back burner my plans to blog on the concept of probability and its various expressions. I can do that later, but right now I want to persuade you to read Nocera. Offering a really good capsule history of
Value-at-Risk modeling for the uninitiated, Nocera delves into a theme that has pervaded my recent blogs for Palisade: it may not be the model but more likely the person managing the modeling who introduces slop into risk analysis. He has talked to a good many risk management experts, and is able to present a balanced view of both the limitations of VaR techniques and the shortcomings of the people who relied so heavily on their risk assessment techniques as to bring about the collapse of those sectors of the financial markets that depend on hedging and mortgages.
» Read more

Six Sigma Terminologies
Thursday, January 8, 2009
In a recent article called "Six Sigma Speak" in iSixSigma Magazine, Craig Gygi does a very nice job articulating one of the barriers to Six Sigma, and that is the terminology that we use. We are laden with terms from other languages such as "poka-yoke," “same letter lists,” as well as synonyms and acronyms galore. As he describes, this is caused because each organization that adopts Six Sigma then adapts words to reflect the specifics to their organization’s culture and priorities.
» Read more

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Upcoming Webcast
"Using @RISK to Simulate a Regression Derived
Transfer Function Created Using Minitab”

Presented by Anwar El-Homsi
TPS-Lean Six Sigma LLC - January 29, 2009, 1:00pm EST

This presentation will cover the methods used to generate and build a Regression Analysis equation and the tools necessary to evaluate and diagnose how effective the equation is. We'll also cover the application of Monte Carlo Simulation using @RISK software to assess the performance of the process.

» Register now

Case Study
At Cummins, Inc.,
@RISK is Standard for Six Sigma

In an era when takeovers and mergers are common, Cummins, Inc., the world’s leading designer and manufacturer of engines and related systems, has remained a strong, independent, global power leader committed to the development of not only its products but its people. According to Cummins’ Ernest Lifferth, Director Design for Six Sigma, the company’s Six Sigma program has a lot to do with this success, and @RISK has a lot to do with the success of their Design for Six Sigma (DFSS) program. Design for Six Sigma has realized hundreds of millions of dollars in cost savings for Cummins.

» Read the case study

Product Spotlight
Asset Price Random Walks and Options Valuation
Models of the prices of assets (stocks, property, commodities) very often assume a random walk over time, in which the periodic price changes are random, and in the simplest models are independent of each other. The future price level of the asset may result in some contract or payoff becoming valuable, such as in the case of financial market options. In these cases, the value of the contract (contingent payment or option) is calculated as the average discounted value of the future payoff. In the special case of European options on a traded underlying asset, the value calculated from the simulation may be compared with mathematical formulas that analytically provide the valuation, such as the Black-Scholes equation. In many more complex cases, the pertinent analytic formulas may be unknown or very complex to derive, and one may wish to rely on simulation techniques. This particular model compares the average simulated payoff for European Call and Put options with the Black-Scholes valuation.

Download the example: AssetPrices.Options.BS.Multi.xls

Product Spotlight
The release of @RISK 5.0 has spurred tremendous response from our users. Every day customers ask us, "What's new in @RISK 5.0?" Read about one of the new features below. Click here to see a complete list of new features, including short 30-second movies.

Drag and Drop Graphs
Any small thumbnail graph can be expanded to a full window by dragging it off of its summary window onto some blank space. You can also easily overlay two or more simulation graphs by dragging graph thumbnails from the Results Summary window onto an existing graph.

See how to drag and drop thumbnail graphs
See how to drag and drop overlays

Function of the Month
The Weibull Distribution
The RiskWeibull function RiskWeibull(alpha,beta) generates a Weibull distribution with the shape parameter alpha and a scale parameter beta.

The Weibull distribution is a continuous distribution whose shape and scale vary greatly depending on the argument values entered. This distribution is often used as a distribution of time to first occurrence for other continuous time processes, where it is desired to have a non-constant intensity of occurrence. This distribution is flexible enough to allow an implicit assumption of constant, increasing or decreasing intensity, according to the choice of its parameter α (α<1, =1, or >1 represent processes of increasing, constant, and decreasing intensity respectively; a constant intensity process is the same as an Exponential distribution). For example in maintenance or lifetime modelling, one may choose to use α<1 to represent that the older something is, the more likely it is to fail.

RiskWeibull(10,20) generates a Weibull distribution with a shape parameter 10 and a scale parameter 20.
RiskWeibull(D1,D2) generates a Weibull distribution with a shape parameter taken from cell D1 and a scale parameter taken from cell D2.

Palisade Software Techniques in the News
Climate Change
Scientists Refute Climate Skeptics
Technique: Monte Carlo simulation   » see @RISK 5.0
Source: Eureka! Science News, January 9, 2009

With the help of Monte Carlo simulation, an international research team demonstrated that global warming is much more likely to be occurring than not.

How Martian Winds Make Rocks Walk
Technique: Monte Carlo simulation   » see @RISK 5.0
Source:, January 8, 2009

Monte Carlo simulation was one technique researchers used to suggest how the rocks on Mars move about its surface.

Medical Insurance
When to Reimburse for Speciality Drugs
Technique: Decision trees   » see PrecisionTree 5.0
Source: Atlantic Information Services, Inc., December 31, 2008

Decision trees help insurance companies determine when and why to reimburse for infrequently used drugs.

Online Retailing
Web Mining: Creating, Enhancing, Mining and Acting on Web Data
Technique: Decision trees   » see PrecisionTree 5.0
Source: B-EYE-Network, December 18, 2008

Decision trees are instrumental in helping online retailers create useful information from the masses of customer data they accumulate.

Robot Teddy Bear Should Enhance Human Relationships
Technique: Neural networks   » see NeuralTools 5.0
Source:, December 17, 2009

The robot's neural network can recognize nine different classes of touch, such as tickling, poking, and scratching.


Palisade User Forums

The Palisade User Forums are online discussion boards where users are invited
to post questions and share ideas on their use of @RISK and other Palisade
software. It's also a great place to check for announcements regarding updates
of Palisade software. Forums are organized by products.

» Join or view the Palisade Forums

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