Quantitative methods
Posted: Sat Jan 18, 2025 6:57 am
Quantitative methods based on numbers will help to understand the size of risks and assess the probability of their occurrence. However, their use requires attention to numbers and formulas. If it is necessary to use such methods, it is recommended to contact qualified specialists.
Monte Carlo method (simulation modeling)
Monte Carlo is an approach that involves assigning random numbers to each possible risk within a certain range. The range is chosen according to the expected distribution of risk factors.
For each hazard, it is necessary engineer data package to develop possible scenarios for the development of events during its implementation, corresponding to the established interval. For example, what will be the consequences if the cost is set within 100-130 rubles or 170-200 rubles. After entering this data into a special program, calculations will be made and the most probable values for each indicator will be presented.
For example, completing a project in two months with a cost of $5 million is considered the least likely, while the probability of successfully completing such an undertaking in two years with an investment of $20 million would be significantly higher.
Sensitivity analysis
Sensitivity analysis is an approach that helps to categorize risks according to their level of importance. Some hazards require special attention, while others can be analyzed with fewer resources.
Sensitivity study
Source: shutterstock.com
In this case, it is necessary to determine how much the changes can affect the key business indicators. For example, an increase in taxes can have an impact of -5% to +10%, and a decrease in the cost of raw materials - from +15% to +60%.
Let's say a company that sells children's toys decides to conduct an analysis to find out which events can most significantly reduce profit levels. The stores are located in the city center, which ensures a constant flow of customers. The prices for the goods are slightly lower than the market price due to wholesale purchases, the products look nice and are liked by children. In addition, the company has its own website where new arrivals are announced.
The analysis showed that the most unfavorable consequences for the business would be in the event of relocation of the outlets. A small increase in prices for toys will not greatly affect the customer base. On the other hand, the website conversion is low. The main priority for the company is to preserve the outlets and extend lease agreements, while investments in website development will be inappropriate.
Case: VT-metall
Find out how we reduced the cost of
Monte Carlo method (simulation modeling)
Monte Carlo is an approach that involves assigning random numbers to each possible risk within a certain range. The range is chosen according to the expected distribution of risk factors.
For each hazard, it is necessary engineer data package to develop possible scenarios for the development of events during its implementation, corresponding to the established interval. For example, what will be the consequences if the cost is set within 100-130 rubles or 170-200 rubles. After entering this data into a special program, calculations will be made and the most probable values for each indicator will be presented.
For example, completing a project in two months with a cost of $5 million is considered the least likely, while the probability of successfully completing such an undertaking in two years with an investment of $20 million would be significantly higher.
Sensitivity analysis
Sensitivity analysis is an approach that helps to categorize risks according to their level of importance. Some hazards require special attention, while others can be analyzed with fewer resources.
Sensitivity study
Source: shutterstock.com
In this case, it is necessary to determine how much the changes can affect the key business indicators. For example, an increase in taxes can have an impact of -5% to +10%, and a decrease in the cost of raw materials - from +15% to +60%.
Let's say a company that sells children's toys decides to conduct an analysis to find out which events can most significantly reduce profit levels. The stores are located in the city center, which ensures a constant flow of customers. The prices for the goods are slightly lower than the market price due to wholesale purchases, the products look nice and are liked by children. In addition, the company has its own website where new arrivals are announced.
The analysis showed that the most unfavorable consequences for the business would be in the event of relocation of the outlets. A small increase in prices for toys will not greatly affect the customer base. On the other hand, the website conversion is low. The main priority for the company is to preserve the outlets and extend lease agreements, while investments in website development will be inappropriate.
Case: VT-metall
Find out how we reduced the cost of