Risk is ever present in business, so when it comes to making business decisions, the challenge is in measuring and balancing all the risks involved and adequately factoring in how changes in circumstance might influence the decision. Understanding variability and risk is what statisticians do. Understanding variability and risk in a commercial context is what Data Analysis Australia does.
Business risk uses the language of statistics - how "likely" it is for a scenario to occur, and what outcome is "expected"? Data Analysis Australia uses statistics, probability theory and mathematical game theory to develop business models. Typically statistical analysis is used to quantify probabilities of events occurring and probability theory is used to combine these together in a computer model. Where the commercial model includes competitors, game theory is used to model their behaviours.
Examples of project experience where Data Analysis Australia has used business and risk analysis are listed below.
Risk Analysis in Off Shore Gas Project
Data Analysis Australia was involved in the modelling of the cost uncertainties of a large off shore gas project. When investments are measured in billions of dollars, it is essential to go beyond a single set of costs and to think of the range of costs that might be incurred. The statistical formalism of our approach both quantified the uncertainties and focused attention on areas where the risks were the greatest.
Modelling of Investment Strategies in Superannuation Investments
Likely returns from superannuation investments can be modelled using a risk analysis approach. Data Analysis Australia developed a methodology and software for the accurate modelling of investment strategies, taking into account both the probabilistic structure on returns and the detailed accounting and tax implications for individuals. The statistical model needed to address the correlations and long tails of financial data, while at the same time be implemented in an operational system.
Forecasting Passenger Numbers for Planning of Airport Development
For an island airport development, Data Analysis Australia calculated forecasts of the future passenger numbers for both short and long term planning. In the short term, a 'most likely' scenario was required to inform investment. In the long term, 'reasonably possible' scenarios were required for master planning. Data Analysis Australia recognised that demand was strongly affected by a dozen significant developments, each with uncertain chances of taking place, uncertain timing and uncertain scale. A risk analysis approach produced the required forecasts.
Risk Assessment Tool for Agricultural Investment CompanyData Analysis Australia development a risk assessment tool for a national agricultural investment company. Statistical models were developed to forecast likely distributions of future crop values. These models were based on distributions of historical yield and pricing data and incorporating negative correlations between yield and price. This has allowed the client to obtain a better assessment of risk for both investors and farmers, assisting in the management of the investment portfolio.
For more information about any of our Areas of Expertise please contact one of our consultants, email us at daa(at)daa.com.au or call 08 9468 2533.