MM4XL Home > Decision Making > Risk Analysis with Monte Carlo Simulation

Monte Carlo Simulation Software for Risk Analysis and Process Management

Risk Analyst performs risk analysis, applying the Monte Carlo simulation technique to simulate the outcomes of management processes, business process, sales forecast, pricing model, and more.

Risk Analyst helps you to build models in a way that takes into account the uncertainty inherent in the events, and applies the Monte Carlo simulation technique to simulate the outcomes of the models. Risk Analyst is an Excel add-in software. It provides a multitude of functions that enable you to model virtually any scenario you can think of. It is fast and accurate, displaying the results of the simulation in a preview window. A fitting tool is available to help identify appropriate distribution functions for the user data, and Quick Help can be called from the tool to find out when to use each of the many functions. Together with another MM4XL software tool called Decision Tree, Risk Analyst provides you with all the resources needed to analyze even very complex business decisions.

What: Monte carlo simulation software for risk analysis and process management

Click to enlarge

With this risk analysis tool you can build and run a Monte Carlo simulation of business and management process models, such as a sales forecast, a pricing model, a new product launch scenario, or any other scenario model. Risk scenarios are representations of real issues that take into account the uncertainty involved in the events. A typical scenario many managers build one or more times a year is a profitability statement. Such a model is often built to estimate a Net Present Value (NPV), and it uses information that is not always obvious or univocal. For instance, how many new competitors will enter the market in the next 24 months? How will the market size change? What will our market share be? And so on. These are questions every manager could give a rough answer to, but in general they are difficult questions to answer with absolute certainty. Therefore, why should decision-makers rely on a 'single-bullet model' that cannot account for uncertainty? Over the past two decades this question has been approached by a number of economists, and the result is the growing application of modeling techniques able to account for the uncertainty governing most scenarios, including those relating to business activities. Launching new products, optimizing processes, estimating future outcomes, finding optimal solutions, evaluating costs, scheduling operations, and more can be approached from a completely new perspective that puts the whole decisional team and its individual members in the position of thoroughly understanding the nature of managerial problems, explaining why one solution may be better than another, and showing how an action today can affect results tomorrow. Building successful models is not an easy task, but with practice you will find that modelling will become a very rewarding activity, both in terms of your professional growth as a manager and of the wealth of the business you work in.

When: Monte carlo simulation software for business process management

Click to enlarge	Large business and management processes entailing uncertainty may put the company wealth at risk. In such cases, when uncertainty and risk fly high, it is highly recommended to build simulation models to help managers make educated decisions. This way, not only is the business decision based on solid evidence, but the overall understanding of the business context will be much clearer.

Who: Monte carlo simulation software for strategic decision-makers

The Risk Analysis tool is used by business decision-makers often supported by business analysts. Among our business decision-maker clients there are:

• General Managers and CEOs
• Business Directors
• Marketing Managers
• Pricing Managers
• Product Portfolio Managers