Informed Investment Planning with @risk and TopRank

Each year MegaFon needs to plan for the continuous upgrading of its network. Projects include building new antenna, installing the latest equipment and laying fiber optic cable. In 2012, MegaFon took the decision to invest in a large construction project with the aim of Minimizing its operating costs and improving network quality and control over technical operations.

Two potential locations were shortlisted and the management team used Palisade’s software to make an informed decision on the optimal one. It first used Palisade’s TopRank to perform sensitivity analysis to identify the factors in each location that would have the most influence over the total cost of the project. From here, the team used @RISK to forecast how these critical factors might change. This allowed MegaFon to understand the most likely Net Present Values (NPVs) for each possible location and identify the risks for building or not building (i.e. opportunity cost) each data center. @RISK allowed MegaFon to use graphs to show easily how NPV and cash flows could change over time, and the probabilities of those changes occurring, rather than the static number that they would have had to rely on without the risk analysis tool.

Reducing Financing Risks

Future plans for MegaFon’s risk management programme include developing it to enable the company to analyze various risks through modeling. For example, as part of an exchange rate risk mitigation plan, MegaFon plans to analyze the different derivatives they can purchase by simulating different scenarios and exchange rates to provide a cleaner picture of potential losses and gains.

Versatile Software Tools Underpin Enterprise Risk Management

“Palisade’s decision support software is a well-balanced and flexible instrument that can be applied to a wide variety of situations, making it ideally suited to managing risk across the enterprise,” explains Dmitry Shevchenko, head of risk management at MegaFon. “The technology is reinforced by Palicade’s proactive approach to business: it provides support including articles, books and events, such as its informative and example-led conference programme. Overall the company ensures that customers get the most out of these versatile tools.”

Translation

Translate the sentences focusing on the underlined terms.

Risk

1. Operational risk management plays a key role in the strategic success of organizations, but it presents unique challenges compared to managing market and credit risks.

2. Strategic and tactical risk management functions are necessary if a firm wants to ensure that its risk principles are embedded throughout the organization.

3. Many people view operational risk management only as a back-office function that evaluates processes and systems.

4. In today's global market environment managers of operational risk must prepare for a variety of business vulnerabilities facing organizations and their counterparties. 

Insurance

1. The last risk-management technique is the traditional one: purchasing an insurance policy.

2. Insurance costs can add up, managers should: 1. work with an independent insurance broker to find the best coverage for their property, 2. demand service from their broker, 3. make sure that the insurance carrier they select is reputable and in good financial condition.

3. In today's climate of rising insurance costs and uncertainty over the stability of many insurers, managers should work to minimize risks and stabilize insurance costs - without cutting down on vital levels of financial protection.

4. By employing the right amount of control, managers can reduce both the frequency and the severity of loss, thus reducing insurance costs.

Writing