Wednesday, 20 September 2017

Palisade underpins MegaFon's enterprise risk management programme

Palisade
Thursday 27 February 14

Russian mobile network operator, MegaFon, uses several tools from Palisade’s DecisionTools Suite to integrate risk management within its budgeting and investment planning processes. This decision support software provides Megafon`s management team with transparency and understanding about the risks involved in planning, and therefore facilitates decision-making without guesswork…

Russian mobile network operator, MegaFon, uses several tools from Palisade’s DecisionTools Suite to integrate risk management within its budgeting and investment planning processes. This decision support software provides Megafon`s management team with transparency and understanding about the risks involved in planning, and therefore facilitates decision-making without guesswork. This enables the company to maximise capital expenditure efficiency.

Every year, MegaFon’s eight regional branches in Russia are required to undertake a major planning and accounting exercise for the 12 months ahead. Each branch states the risks it faces, such as competition, changes in legislation that will require it to operate differently, price increases and changes to staffing costs. They also calculate how much each budget will be over or under the forecast.

The risk management team at MegaFon’s headquarters amalgamates the information from each of its offices and simulates possible scenarios using a model using @RISK, Palisade’s risk analysis software. The variables within these models are analysed in a tornado graph, allowing the five critical factors most likely to significantly affect the company’s gross revenue to be identified and therefore mitigated.

In addition, @RISK shows realistic minimum, best case and median budget figures and the probability of their occurrence. These are compared to the budget plans to determine whether the forecast is too aggressive or not ambitious enough. Overall, the management team can see whether their desired revenue is achievable.

Each year MegaFon needs to plan for the continuous upgrading of its network. Projects include building new antenna, installing the latest equipment and laying fibre optic cable. In 2012, MegaFon took the decision to invest in a large data centre construction project.

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 centre.

“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 Palisade’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.”


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