Risk Management as Good Business
Yale University behavioral economists professor Robert Shiller recently identified the cause of the financial crisis, stating: “The real problem is that we weren’t managing risk.” Standard and Poor’s has added enterprise risk management as a factor to consider in issuing credit ratings. These trends point to a growing emphasis on risk management across all industry sectors, not just finance. Companies that ignore this trend risk being at a competitive disadvantage when the global economy emerges from recession. Jeff Smith, chief risk officer of Consulting Services Support Corp, notes, "Once a number of companies begin to better manage and mitigate their own unique risks of loss, it only makes sense that other corporations that wish to retain competitive advantage and attractiveness to shareholders would follow suit.”
The need for risk management points to the need for widespread, scalable risk management tools. @RISK and DecisionTools Suite software add Monte Carlo simulation and other analytical techniques to Microsoft Excel — a platform everyone can understand. Using Palisade risk analysis tools, analysts and managers can make quantitative, data-driven, better-informed decisions.
» Learn more about @RISK
» Learn more about DecisionTools Suite
» Read the article “Undervaluing the Need for Risk Management is Risky”
from IT BusinessEdge
» Read Robert Shiller’s remarks on Bloomberg.com
Aberdeen Group Survey Invitation
Taking Lean Six Sigma Beyond Manufacturing
The Aberdeen Group invites you to participate in a survey to help uncover the strategies, capabilities, and technology solutions that enable best-in-class business improvement initiatives beyond manufacturing.
Each respondent who answers the survey will receive a complimentary full copy of the report containing this study's results (a $399 value), once it publishes. Individual responses will be kept strictly confidential and data will only be used in aggregate.
We greatly appreciate your participation in this research effort and look forward to sharing our findings with you.
» Take the 15-minute survey now
Palisade Blog Headlines
March without the Madness
Friday, March 20, 2009
Two behavioral economists at the Wharton School have recently published a statistical analysis of win-loss patterns in N.C.A.A. basketball games. Jonah Berger and Devin Pope collected data from more than 6500 games since 2005, and guided by a psychological/ economic model called Prospect Theory, they cranked their win-loss data through a specialized regression analysis (probably not a standard offering in Microsoft Excel statistics). Then they replicated this modeling with data from a lab experiment using keyboard striking instead of basketball moves.
» Read more
Some Best Practice Principles in Excel Modelling
Friday, February 20, 2009
Colorado State University received a large grant to develop risk assessment and decision evaluation tools to optimize strategies for managing Drooping Brome (also known as cheatgrass). Researchers are taking an operations management approach to staving off this weed.
» Read more
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"Predictive Analysis using The DecisionTools Suite”
Presented by Prakash Shrivastava,
Strategic Management International, Inc.
March 26, 2009, 1:00pm EST - This Thursday!
In this webcast, we will explore the capabilities of Palisade's DecisionTools Suite in predictive analysis. Using an example from the Business Financial Services /Collections Industry, we will demonstrate: StatTools to show patterns of customer profiles who default on payments; @RISK to show the impact on profits of companies due to reduced ability to collect in deteriorating economy; NeuralTools to show how companies can use customer profiles to develop a predictive model – whether or not a customer will pay; PrecisionTree to determine whether a company should invest in new technology for automating customer contacts. Also, other useful products/elements of the Palisade DecisionTools Suite will be featured.
» Register now
"The use of The DecisionTools Suite in
Probabilistic Cost Estimating
for Environmental Asset Retirement Obligations”
Presented by John W. Lynch, P.E., President, JWL Enironmental
April 2, 2009, 11:00am EST
This free live webcast will demonstrate using the DecisionTools suite in financial risk quantification (RQ) for environmental remediation and site cleanup efforts. The session will consist of three segments: RQ Drivers, RQ Techniques and Resources, RQ Examples and Lessons Learned.
» Register now
"Accelerating Product Design with Simulation and
Presented by Andy Sleeper, President, Successful Statistics LLC
April 30, 2009, 12:00pm EST
The key to successful new product development is to anticipate and prevent problems before they happen. Design For Six Sigma (DFSS) is a system of risk-prevention tools used by world-class companies to launch new products of the highest quality, in the least time, and at the lowest cost. Simulation and optimization tools are among the most powerful DFSS tools, allowing engineers to prevent performance and capability problems before the first prototypes are built. What once required months or years to discover now takes only minutes to prevent.
» Register now
Industry Leaders at University of Houston
put DecisionTools to Work
Phil Rogers teaches Managerial Decision Making to MBA candidates at the University of Houston’s C. T. Bauer College of Business where most of his students are managers with industry experience. These students need analytical tools that offer both a short learning curve and the ability to accurately model their real-life problems. Phil uses Palisade’s DecisionTools Suite in the classroom because “the leverage you get by using these tools in Excel is phenomenal. My students can very quickly learn and apply the techniques they see in class to difficult decision-making problems faced by their firms.” Students include managers from Sinopec and CNPC, the two largest petrochemical companies in China.
» Read the full case study
Oil & Gas:
Production and Economic Forecast using Exponential Decline
This model forecasts production, revenues, and present value based on exponential decline. Uncertain input factors include yearly production, decline rate, GOR, price of gas, price of oil, and rate of increase in oil and gas prices.
A SimTable function is also used in the Discount Rate input that is used to calculate Total NPV. This contains two possible values for Discount Rate – 12% and 14% - enabling you to run two back-to-back simulations to compare the effect of different discount rates on your Total NPV.
Download the example: Declin.xls
The Gamma Distribution
RiskGamma(alpha,beta) specifies a gamma distribution using the shape parameter alpha and the scale parameter beta.
The Gamma distribution is the continuous time equivalent of the Negative Binomial. It represents the distribution of inter-arrival times for several events from a Poisson process. It can also be used to represent the distribution of possible values for the intensity of a Poisson process, when observations of the process have been made.
RiskGamma(1,1) specifies a gamma distribution where the shape parameter has a value of 1 and the scale parameter has a value of 1.
RiskGamma(C12,C13) specifies a gamma distribution, where the shape parameter has a value taken from cell C12, and the scale parameter has a value taken from cell C13.
Wall Street Accelerates Options Analysis With GPU Technology
Technique: Decision analysis » see DecisionTools Suite 5.0
Source: Wall Street & Technology, March 11, 2009
Graphic processing units—GPUs—are now being used to speed up computation for Monte Carlo simulation and other analytic processes used in the pricing of options.
How to Gauge IT Performance
Technique: Monte Carlo simulation » see @RISK 5.0
Source: IT-Director.com, February 24, 2009
A process improvement consultant describes the use of Monte Carlo simulation in assessing IT performance.
Technique: Decision trees » see PrecisionTree 5.0
Source: EarthTimes, February 25, 2009
A new IPod application based on decision trees allows users to punch in their symptoms and choose the best means of treatment.
Oil and Gas
Identifying Dry Holes
Technique: Monte Carlo simulation » see @RISK 5.0
Source: Oil & Gas Eurasia, February 2009
Interpretive software based on Monte Carlo simulation guides the drilling for oil and gas so as to avoid dry holes and the wasted expense associated with them.
Search Engines and Satisfaction
Technique: Neural networks » see NeuralTools 5.0
Source: PennState Live, March 11, 2009
Penn State computer scientists have developed a neural net technology to analyze click-through behavior and predict customer satisfaction with search results.
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.
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