@RISK Modeling Tips
@RISK Helps Nuclear Power Company Reduce Cost Overruns by 80%
Almost 30 years later, the first contracts for new plants were signed by a major U.S. nuclear power company in 2008. The total expected project cost for the three projects was over $30 billion. Hoping to avoid the abysmal track record of cost overruns in the industry, the nuclear power company wanted to use a new and improved risk-management approach to the planning process—so they hired Dr. Sola Talabi, Risk Management Professor at Carnegie Mellon University and Risk Management Consultant for Pittsburgh Technical, to serve as Nuclear Power Plant Risk Manager. “They knew what the history had been with these projects, and they didn’t want it to happen again,” says Dr. Talabi.
In previous power plant construction projects, risk management was only an objective of project managers. This time, risk management was both an objective and a function; the company created a dedicated risk organization whose only role was to manage risk. Furthermore, the company switched from deterministic risk planning methods, to probabilistic methods—using @RISK. Armed with the software, Dr. Talabi and his risk management team were able to characterize the uncertainty associated with cost items and perform quantitative risk analysis using Monte Carlo simulation. They were also able perform a sensitivity analysis to identify key cost drivers, such as the fact that supply chain issues was the greatest risk driver of all.
Thanks to this analytical, @RISK-driven approach, Dr. Talabi and the risk organization were able to dramatically impact these nuclear power plant projects, reducing cost overruns by roughly 80% relative to the historical trend. “While we still have cost overruns, it’s nothing like what we had before,” says Dr. Talabi. “I think it’s very important for decision-makers to realize that the rampant cost overruns of the past can be much better managed using tools like @RISK.”
Palisade’s 2014 Risk Conference New Orleans Draws Professionals from Many Industries
Over 35 sessions were held across four conference tracks, including software training on @RISK and the DecisionTools Suite as well as real-world industry case studies. Case studies encompassed a wide range of applications, including engineering reliability from CH2M HILL, project funding from Entergy Corp, safety and security from NASA, cost modeling from Woodside Petroleum, and many others. The conference keynote was delivered by Dave MacAdam from Novelis, and dealt with valuation of uncertain R&D projects while facing challenges in organizational culture.
The Risk Conference events prove repeatedly to be invaluable opportunities for participants: “This conference was great. It provided me a lot of insight on the capability and uses of the @RISK tool,” said James Uzdavinis, Engineering Project Controls Manager at The Mosaic Company.
The conference wraps up a global series of conferences for 2014. The 2015 conference schedule will be posted soon!
'Risk Management Monitor' features Palisade in Analyzing the Real Costs of Climate Change
Are companies prepared for skyrocketing energy costs to combat extreme heat? Can farmers handle average crop losses of up to 73%? Should businesses invest in oceanfront property that is virtually guaranteed to flood?,” Heffernan asks in his piece.
Some organizations are preparing themselves. The Australian Federal Government hired AECOM, a professional technical and management support company, to run Monte Carlo simulation-based evaluations on flooding risk in populated areas, such as the Narabeen lagoon, near Sydney. “Because climate change is expected to increase flooding in the Narrabeen catchment over the coming century, decision-makers needed a clearer understanding of the different possible adaptation measures,” Heffernan says.
Introducción al análisis de riesgo y decisión
Introduction to Risk Analysis using @RISK
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