E-Focus: @RISK Plays Key Role in Toy Maker LEGO’s
Enterprise Risk Management Strategy In This Issue
What’s New
» @RISK Plays Key Role
   LEGO’s Enterprise Risk
   Management Strategy

» Palisade Featured in
   Actuarial Post

» Identifying Key Risks
   to the Development of a
   Pellet Manufacturing
   Plant Analysis

Case Study
» Portfolio Management &
   Financial Planning
   using @RISK

@RISK Modeling Tips
» Modeling Tolerance Analysis
   in Six Sigma: Gear Pump
   Assembly Optimization

Upcoming Webcasts

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2013 Palisade Risk Conferences
Plan now for the eighth Palisade Risk Conference series, to start in March next year in South America. More information about each conference to be announced soon.
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4-5 Feb., 9am-1pm ET

7-8 Jan., 9am-1pm ET
27-28 Feb., 9am-1pm ET


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@RISK Plays Key Role in Toy Maker LEGO’s
Enterprise Risk Management Strategy

Toy manufacturer The LEGO Group uses Palisade’s risk analysis software @RISK as a key tool in its Enterprise Risk Management framework. The company undertakes Monte Carlo simulations to quantify the volatility that it sees as inherent to its business activities. Key risk information is then presented to the board of directors who, knowing the impact of each risk, can make informed strategic decisions.

Founded in 1932, LEGO is the world’s third largest toy maker. Operational risk management has been a key part of the company’s strategy for many years. @RISK is used to handle issues including supply disruptions, demand volatility, currencies, employee health and safety, and product quality and safety. Today, the sophistication of LEGO’s Enterprise Risk Management (ERM) framework is widely recognized. It is one of the foremost companies to use Monte Carlo simulations to quantify risk.

For example, suppose budgeted sales were set at €2 billion. If the @RISK model shows there is a 5% risk that sales won’t reach more than 81% of this level, the resulting revenue shortfall is €400 million – a significant sum to lose. Equally, a 5% chance that they will be €550 million over budget is also risky because the LEGO Group may not be able to manufacture this amount. However, knowing these figures in advance enables the company to take mitigating action and minimize the effects on the company.

LEGO believes that risk management is about extremes, not averages. It wants to know what will happen in the 10% chance that something does occur, not the 90% chance that it doesn’t.

“Today [@RISK] enables the ERM team to undertake in-depth
  technical analysis of the risks that are inherent to our operations.
  At the same time it makes it straightforward to present the
  findings in a business-focused way to the board of directors so
  that they can make informed strategic decisions. The overall
  result is that management can react quickly to mitigate risk
  as well as leverage opportunities.”
           Hans Læssøe, Senior Director,
           Strategic Risk Management, The LEGO Group

 » More about @RISK

Palisade Featured in Actuarial Post
Palisade contributed two recent articles to the Actuarial Post, a leading online portal providing news, white papers, resources and analysis to actuaries worldwide. In “Knowledge (of the Unforeseen) is Power,” Palisade’s Randy Heffernan discusses the need for risk analysis at the enterprise level. The article explores different types of risks faced by organizations, as well as quantitative approaches that can help and steps for adopting a “risk culture” within a company.

In “Monte Carlo … Or Bust?” Randy talks about the use of Monte Carlo simulation in the world of reinsurance. Several examples are discussed demonstrating how Monte Carlo can be useful when compared with traditional, more static measures.

 » Read “Knowledge (of the Unforeseen) is Power:
    The Necessity of Risk Analysis in Enterprise

 » Read “Monte Carlo…Or Bust?”

New White Paper:
Identifying Key Risks to the Development
of a Pellet Manufacturing Plant Analysis

by William (Bill) Strauss, FutureMetrics, LLC., August 2012,
Presented at the 2012 Palisade Risk Conference, Las Vegas

This analysis contains detailed financial and risk modeling for the construction and operation of a 50,000 ton per year nameplate capacity wood pellet fuel project valued at approximately $11 million.

The modeling incorporates the uncertainty of some of the key inputs to both the capital cost and the operating cost models. Monte Carlo simulations reveal the expected distributions of key cash flow metrics and the sensitivity of the key cash flow metrics to changes in inputs. The analysis shows the risk of insufficient cash flows to the project developers and identifies those cost inputs and revenue generating assumptions whose changes generate the greatest risk of project failure.

The analysis is presented by FutureMetrics. FutureMetrics is a globally recognized consultancy in bioenergy project development.

 » Download the full paper
 » View the conference presentation

Case Study
Portfolio Management & Financial
Planning using @RISK

As presented by Matthew Rosenberg, RoseCap Investment Advisors, at the 2012 Palisade Risk Conference Las Vegas

Matthew Rosenberg discusses the use of Monte Carlo simulation and optimization to create customized personal financial plans for individuals. He also covers how the results of a personal financial plan are translated into a portfolio management strategy that will give an investor the highest probability of achieving a client’s financial goals.

 » Download the presentation
 » Register for Matt's Rosenberg's January 17th Webcast:
    Portfolio Management using @RISK


Product Spotlight
Modeling Tolerance Analysis in Six Sigma:
Gear Pump Assembly Optimization

Excerpted from Chapter 8 of RISKOptimizer for Business Applications
by Roy Nersesian

@RISK and RISKOptimizer can be used to effectively model tolerance analysis in engineering and manufacturing applications. This model represents a tolerance analysis study performed to solve a potential assembly issue in a gear pump typically used in powerpacks, forklifts, and low noise emission machines.

 » Read more and download the model

Use of @RISK in Food Safety Risk Assessment
Presented by Charles Yoe, Notre Dame of Maryland
University and Charles Yoe Consulting
   January 10, 2013 11am EST (Eastern Standard Time)
» Register Now

Portfolio Management using @RISK
Presented by Matt Rosenberg
RoseCap Investment Advisors
   January 17, 2013 11am EST (Eastern Standard Time)
» Register Now

» See complete Webcast schedule


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Palisade 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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