Palisade Corporation
Risk modeling and analysis in Excel
Dave Bristol, Eastern Region Sales Manager
800-432-7475 x333, dbristol@palisade.com
http://www.palisade.com
Agenda
Palisade Corporation Overview
What is risk?
Using Excel modeling to better understand
how risk impacts our work
Palisade Corporation
Continuity and longevity:
Palisade Corporation is now in its 28th year as a provider of general
purpose quantitative decision-making tools and services, boasting the
same core development team since the initial release of @RISK:
World Headquarters:
Ithaca, New York
Palisade Europe:
London, England
Palisade Asia-Pacific:
Sydney, Australia
Palisade LTA:
Rio de Janeiro, Brazil
Palisade Japan:
Tokyo, Japan
Sales, Marketing, Training/Consulting, and Ops/Fulfillment also have
team members with 10+ years service time.
Palisade is proud to be employee owned.
Palisade Corporation - Education
Solid Academic Backing:
Palisade products are used in curriculums at more than 100 MBA
programs worldwide, as well as in thousands of other academic
fields at the undergraduate and postgraduate levels.
Palisade software is the featured Monte Carlo simulation
product in dozens of academic textbooks.
Allied with professional development organizations:
Palisade is accredited as a PMI R.E.P. or Project Management
institute Registered Education Provider.
Palisade is registered with the National Association of State
Boards of Accountancy (NASBA) as a sponsor of continuing
professional education on the National Registry of CPE Sponsors.
Other alliances available as needed.
Thousands of companies worldwide in all
areas of business and industry, including a
majority of Fortune 500 companies amounting to hundreds of thousands of
users, make productive use of Palisade
software every day.
What is risk, exactly?
Vague term used in many ways by many people
In modeling, it can be positive (opportunity)
Uncertainty (estimate accuracy)
Variability (random or quasi-random)
Likelihood of occurrence, size of impact
Everybody knows about them!
Common “most likely” estimates are hedged
Software allows us to incorporate ranges into
modeling
Where do we find risks to model?
Everywhere! (It’s a multi-tool, not a hammer)
Investment
Retirement
Currency/options/VAR/DCF/etc.
Insurance
Losses/premium pricing/choosing a plan
Energy
Futures pricing
Production capacity consumption projection
Manufacturing
Equipment lifecycle
Inventory Management
Pharma/Health Care
R&D
Disease transmission and response planning
DecisionTools Suite
Integrated risk and decision analytics
All products add-in to Excel & include XDK
@RISK – Simulation
RISKOptimizer and Evolver – Optimization
PrecisionTree – Decision Tree analysis
NeuralTools – Neural network prediction
StatTools – Statistical analytics
TopRank – Sensitivity Analysis
@RISK combines Monte Carlo Simulation with other
statistical techniques to give you:
 The relative likelihood of all possible outcomes to
your model.
 The impact of variation within uncertain inputs has
on the outcomes of your model.
 A breakdown of the key drivers in your model:
What pushes profits forward? What leads to
losses?
 A better understanding of where to focus your
mitigation resources.
 Clear, user-friendly graphs and reports to
communicate findings to decision makers
regardless of statistical savvy.
RISKOptimizer - Functionality
Included with @RISK Industrial and DecisionTools
Suite Industrial
Combines @RISK’s Monte Carlo simulation with
genetic-algorithm based optimization
Allows for optimization of aspects of a distributed
objective and solving of complex non-linear models
More robust than a deterministic optimization
Customers originally combined @RISK and Excel’s
Solver for stochastic optimization
RISKOptimizer - Applications
Portfolio optimization and allocation
Project selection
Capacity planning and production optimization
Scheduling (job shop, manpower)
Bidding
Inventory management
Prototyping/component interaction
PrecisionTree - Functionality
Decision trees can be built directly in Excel
Allows for large-scale options models to be built over
underlying models
Evaluate tree by standard tree calc, objective function,
worksheet calc, macro, etc.
Can be combined with @RISK for stochastic decision
tree analysis
Customers originally combined @RISK and DPL/DATA
PrecisionTree - Applications
Real Options
Exploration/Production
Game theory
Structural integrity planning
Resource management
Classification/evaluation
Diagnosis/treatment
NeuralTools - Functionality
Palisade’s first product to truly meld qualitative and
quantitative analysis via Neural networks
Offers multiple neural network types and “BestNet”
search to determine best network
Requires no neural network expertise
Verifies it’s own results with instant LiveUpdates
Analyze categorical data in concert with statistics
LiveUpdate works with RISKOptimizer to find optimal
answers to questions based on your network
NeuralTools - Applications
Credit scoring/loan underwriting
Market pricing/prediction (energy, etc.)
Environmental analysis
Fraud notification
Counter-terrorism
Medical diagnosis/treatment
Drug efficacy
StatTools
Collection of statistical processes in Excel for data
analysis without leaving the spreadsheet
 Forecasting & Regression
 ANOVA/Correlation/covariance
 Non-parametric tests
 Much more
Replaces statistical processes identified by our clients
as unstable or inaccurate in Excel
Supports up to 16 million data points/variable
Created Excel 2007 before 2007 existed!
XDK for custom function creation
TopRank
Utility for sensitivity analysis in Excel
Determine which model inputs drive volatility
Can be used on *any* Excel model
Cut down on model-building time by identifying the
factors that require distributions for simulation
Risk analysis and mitigation in moments – as well as
elimination of supposed risks
@RISK for Project
Simulation modeling in MS Project
Add uncertainty to:
 Tasks
 Durations
 Calendars
 Resources . . . anywhere in Project
Risk-adjusted Gantt chart w/criticality and cruciality
@RISK6 will blend @RISK for Excel and @RISK for
Project into a single unified application for
cost/schedule risk analysis.
Questions?
Dave Bristol
dbristol@palisade.com
802-876-7906