Individual Week 5 Monte Carlo Method Simulation

Monte Carlo Method Simulation

Nathan Nemitz

CMGT-442

October 24, 2016

 Craig McCormick

Monte Carlo Method Simulation

        The Monte Carlo Method can be used to forecast many things. For the most part it is used for looking at the risk or the uncertainty for cost, and project management. It could be customized and tailored for almost whatever the forecasting needs are.

        Since the method can take a large amount of data and use random numbers that are recalculated every time the spreadsheet is refreshed you can get variety of outcomes. You can have the simulation run as many times as you may deem as necessary. Obviously the more simulations that you run the better your results will be. These should be done thousands of times.

        These could be used to calculate how likely a risk will occur over a span of time.  Since you can run thousands of simulations the data can become overwhelming. It is important to have information averaged out so it can be utilized quickly. This can help you figure out for example what the likely hood a risk might occur over the period of a year broken down week by week or month by month. This could be used to find what the best and worst case scenarios would be for the time a project would take. Being able to determine the likely hood that a project might go over the proposed timeline.

        When looking at this method for a risk assessment point of view it can defiantly help find unknown percentages that would not have been thought of otherwise. When using this you will need to have some historical data available to set up the parameters.  When you have the historical data you will be better equipped to calculate the risks.

        The Monte Carlo Method is a great tool to use for forecasting. When you apply it to help with risk assessments it will help eliminate the unknown probabilities of events happening.