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MATHEMATICS, SIMULATION AND MODELLING
18 May 2007
You take risks every day. Where to invest, what product to make, what price to charge – the list is endless. Risks are assessed based on whatever data you have on hand – historical costs, estimates, and projections. But how often do you wish you had more information.
Prices change, demand fluctuates, and costs rise. It’s easy to take a bad risk if you don’t take into account a range of possible scenarios. Taking smart risks means performing risk analysis. And there’s no easier, more powerful solution than @RISK, the world’s most widely used risk analysis tool!
@RISK Shows You Many Possible Outcomes
@RISK uses Monte Carlo simulation to show you many possible outcomes in your Microsoft Excel spreadsheet – and tells you how likely they are to occur. This means that you finally have, if not perfect information, the most complete picture possible. You can judge which risks to take and which ones to avoid. While no software package can predict the future, @RISK can help you choose the best strategy based on the available information. That’s not a bad guarantee!
The power of Monte Carlo simulation lies in the picture of possible outcomes it creates. Simply by running a simulation, @RISK takes your spreadsheet model from representing just one possible outcome to representing thousands. With @RISK, you can answer questions like, “What is the probability of profit exceeding $10,000,000?” or “What are the chances”
Define Uncertainty with Ease
Replace uncertain values in your spreadsheet with @RISK probability distribution functions. You’ve probably heard of some of these, such as normal (“bell curve”), uniform, and triangular distributions. Choosing which @RISK distribution function to use is easy. @RISK comes with a distribution viewer that lets you preview various distributions before selecting them. You can even set up your distributions using percentiles as well as standard parameters. Furthermore, you can use your own historical data and @RISK’s integrated data fitting tool to select the best function and the right parameters.
Present Results with Stunning Graphs
@RISK provides a wide range of graphs for interpreting and presenting your results to others. Histograms and cumulative curves show the probability of different outcomes occurring. Use overlay graphs to compare multiple results, and summary graphs to see risk over time. Right-click menus and handy toolbars make navigation a snap. You can also generate a one-page, ready-to-print Quick Report of statistical results and graphs!
Identify the Most Important Tasks
@RISK provides you with Sensitivity and Scenario Analyses to determine the critical factors in your models. Use Sensitivity Analysis to rank the distribution functions in your model according to the impact they have on your outputs. See the results clearly with an easy-to-interpret Tornado diagram, then take appropriate management action.