RISK PLANNING - MEASURING UNCERTAINTY
Know With Whom You Are
Is it possible to calculate uncertainty?
The familiar words "a present moment" have a more profound meaning than a simple juncture between the past and the future. They denote a boundary between two different worlds which have their own laws and ways of study: An Analysis of what has already occurred and a Prognosis of simply what might occur. Exact figures do not exist in the Future - only Estimations exist here. Only in the Future can one have various outcomes and sudden changes of circumstance. The world of prognosis is inseparable from the concepts of Chance, Risk and Uncertainty. Even if we are not aware of it, we use these concepts when we intuitively predict future events for choosing the decision in indefinite situations, when circumstances can not be totally controlled and both success and failure are possible. But in case of crucial decisions there is required a well-grounded approach, an exact calculation of risk; in other words - the solution of a prognostic problem. However, elementary mathematics are not sufficient for this. It is necessary to use the methods of Decision theory, Probability theory, and theories of Games and Fuzzy algebra.
I have done my best to develop an easy and understandable program which will help you to formulate and solve prognostic problems and have named it: Business-Prognosis because more often such problems arise in Business. But my users have found many applications for its use, including Construction, Politics, Legal cases, Medical decision-making, etc. It will be much used in education (in the study of Strategic Management, Modeling of Situations, New Mathematical Methods) and generally in Educational Institutions and will be found invaluable for self-tuition. ------------------------------------------------------------------------
If this topic is of interest to you, it will be well worth while acquainting yourself with the concepts of Risk-Planning, on which it is based.
But if you are already familiar with other Decision Analysis tools, you can find out what's new in this program: fuzzy nodes, auto-generated description, etc.
Are you in a hurry? The fastest way to obtain an impression of the software is to see its Screen shot (32.6 Kb).
But still the best way to become familiar with "Business-Prognosis" is to download it (470 Kb), look through its animated overview (where, automatically, the program explains to you all its possibilities and shows easy examples) and evaluate it in working mode.
In any case I advise you to get to know how to obtain a license and become a "Business-Prognosis" Registered User.
If you are interested in Computer Science, you can read an overview of the unique kernel algorithm and the direction future research will take.
Probably you are also interested in other tools in this field. Here are links to other decision analysis software, which I have found on the Internet.
I would much appreciate receiving your opinions, questions, wishes, proposals. An On-line message is the best way to contact me.
You can also visit a Russian version of this web site.
What does Risk-Planning mean?
Any serious venture should start with a plan. Undoubtedly the best way to realize any good idea and protect yourself against possible mistakes is to make a plan, divide the forthcoming venture into separate stages, analyze every stage separately and then control the execution of the plan. Certainly, any plan is intended to make a profit. However, not every plan can be realized. Before making your plan work you should estimate how great the risk is, and whether any circumstances might hinder its fulfillment. This aspect is, in most cases, crucial when you make an entrepreneurial decision. There are many ways of estimating the chances of success: from common sense to multi-criteria analysis. Nevertheless, in such cases the venture is considered as a whole, as only one stage. The advantages of planning are ignored. Traditionally, making the plan and estimating its risk (two vital and closely related activities) are done separately. It is more natural to combine them - to estimate (or calculate) the chance of success of each stage separately and then to form a general conclusion - that is to make a Risk-Plan. The only thing is that the result won't be presented as a certain amount or as a single probability of success. We'll get a sort of distribution of resulting chances. For example, it might happen that a planned transaction results in ten chances out of a hundred of a big profit, thirty chances of a little profit, forty chances of zero profit and twenty chances of expected losses. The plan itself won't represent a chain any more. It will be a sort of a ramified tree because if there is a chance of failure in one of the stages, you should anticipate how to circumvent the problem. Certainly it may sound unusual. But there is nothing complicated about it. This is a typical way of thinking of successful people. The essential part of strategic planning is the ability to see all possible consequences of your activities. This technique isn't new. All particular examples and typical situations were carefully considered: planning multi-step combinations, estimating how valuable information is, "the maximum price of the lock", identifying the best possible commissions, forfeits, the amount of insurance fees, advertising campaigns, auctions, evaluating a contract being offered, etc. The advantages of this approach are obvious. It allows you to foresee consequences and explain your actions in case market conditions change, a partner lets you down, new laws are passed, etc. To make a Risk-plan isn't complicated. But how can the results be summarized? The complexity of the calculations grows in geometrical progression in accordance with the number of stages. So, manual calculations are seldom free of errors and virtually impossible. Business-Prognosis has been developed for solving such tasks. Owing to its new features it is applicable in everyday situations and doesn't require any special qualifications. This system has opened up Risk-planning to the general public and has significantly enhanced its capabilities.
Nowadays hundreds of people have become familiar with Risk-Planning technology using the "Business-Prognosis" program. There are a number of comments from users on the real economic benefits of its application. For many of them, "Business-Prognosis" has become a major tool in their economic activity.
THE USE OF THE WORD "GUARANTEES" IN CONNECTION WITH CONSULTING SERVICES PROVIDED TO THOSE SEEKING CAPITAL OR EXPORT MARKETING DEVELOPMENT OR BUYING AGENT SERVICES.
Arranging Financing is an art. The work must be done in order to have a chance, but honest people know that there is no absolute certainty of 100% chance of success.
It is not ethical or honest for Palms & Company to issue a guarantee to a client regarding the future actions of a third party bank over whose actions Palms & Company has no control.
If the ability existed to predict, with absolute accuracy, a predetermined result it would eliminate any necessity for paying anything to Palms at the beginning of the work, for the expenses of the work. Such sums could simply be paid from the proceeds of the loan, or the guarantee could be used to borrow the expense money from a bank rather than receive it from a client. The concept of paying a fee for work, contingent upon a guarantee of success, is an oxymoron.
A competent doctor can guarantee to do his best but he cannot guarantee the patient will live, and not 100% of patients will live.
The simplest way to prove that the capacity to issue "guarantees" do not exist is to say that if "guarantees' existed, there would be no need for paying for the work that is needed to try to get the financing. In such a case you could go to a bank and present the guarantee of the certainty of the success in getting the money and borrow the funds to pay for the expenses of doing the work of obtaining (applying for), the financing.
Further more it is not appropriate for a capital search consultant to assume (adopt) the risk which exists and which belongs to the client. There is risk in having sickness but the doctor can not be asked to pay for the patient's hospital expenses if the patient dies. Nor can the doctor be expected to die instead of the patient. That is an abnormal, illogical request. Investment bankers are not insurance companies. They cannot eliminate the risk they can only make an honest competent effort to succeed in spite of the risks. For every client risks exist.
Experienced investment bankers have good judgment regarding what businesses have a high likelihood of success in their attempts to find investors of capital. They can of course stop the work they are doing, and the accompanying expense, when their expectations are no longer high enough to warrant, in their judgment, the expense of further work.
Without doing any work at all, it would be impossible for an investment banker to tell anyone what the possibilities are. That would be like a doctor telling a patient that he will live, without giving him a physical examination.
There are many possible reasons for a good situation not being financed. It is not the responsibility of the consultant to assume these risks which are the normal risks of the party seeking the capital. Neither does the consultant receive 100% of the rewards of success when the capital goes to his client. Instead he receives only a small percentage of the money for his work.
Many possibilities exist over which the consultant has no control. The lender and borrower, or investor and recipient, may not offer terms or conditions the other will accept. During the negotiations the political, physical or economic conditions may change. None of these are the fault of the investment banker. Should an attorney be paid if he loses the case? Should a doctor be paid if the patient isn't cured? Is an accountant paid if the company doesn't get a bank loan or isn't profitable? Should an investment banker be paid if the capital is not found? For each of these questions several different contradictory answers can be constructed in a dialectic which assumes different conditions and circumstances.
The most important criteria in selecting an investment banker are
Not all who call themselves investment bankers, deserve the title. Those who investigate the 5 points mentioned above should be able to reach an informed decision as to who deserves their confidence and who doesn't.
There are always those who will do something for less, and... those who consider price alone are their fair prey.
The reputation, experience, history and track-record of
Company can be investigated at:
ASSET RECOVERY MARKETING CLOUT
35 Branches World-Wide
Our customers include Fortune 500 companies with sales exceeding $1 billion. We have been Advisors to U.S. goverment ( SBA, MBDA, USDOC, BIA, DOI) and to other governments (President Alexander Lukashenko, Belarus, President Kuchma, Ukraine; Mayors of Vladivostock, President Yeltsin, Russia.
Please feel free to call by phone, or in person (by appointment) and discuss your objectives, barriers you are experiencing, reservations you have about investment recovery and asset valuation
Thanks for your time
Peter J. Palms PhD - Palms & Company, Inc.,
Investment Bankers Sine 1934
Palms Bayshore Building, Penthouse Suite #408 at 6421 Lake Washington Boulevard North East, Washington State, The United States of America 98033-6876
WWW URL: International Marketing & Finance
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