Risk Analyzer

An add-in for Microsoft Excel that does Monte Carlo simulation risk analysis.

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  • Do Monte Carlo risk analysis
  • Do thousands of cases in just a few minutes
  • Automatic summary of results
  • Multiple distributions, each of which can be customized
  • Menu driven
  • Does not require special training or support contracts
  • Detailed step-by-step exercises to teach you how to use it

If you are evaluating an investment proposal, a new business, a budget, a proposal involving financial risk, or a scientific study, then the Risk Analyzer add-in for Microsoft Excel is the tool for you.

The Risk Analyzer gives you tables and graphics that illustrate the risks of the proposal. Click an image to see it enlarged:

Risk analysis funnel chart showing risk over time
Risk funnel chart (click to enlarge)
Rate of return distribution chart
Rate of return results (click to enlarge)

In addition to result charts like the ones above, the Risk Analyzer also gives you histograms that show cumulative probabilities and tornado charts that show the sensitivity of the output variables to your input variables.

The Risk Analyzer works by doing Monte Carlo simulations. Monte Carlo simulation is simply the creation of many “what if” cases to determine the expected results of a study. You do not need to know statistics or how to write probability formulas to use the Risk Analyzer, and it is unnecessary to embed custom functions into your workbooks. All you need to know is what values your input variables are likely to have: the minimum and maximum values and the distribution shape (uniform, normal, or skewed in one direction). The following illustrates the different types of distributions that are available, each of which can be customized to your needs:

The probability distributions available in the Risk Analyzer
Available probability distributions

The following is a sample Excel model, plus worksheets and reports constructed by the Risk Analyzer (PDF format):

Key features of the Risk Analyzer

  • Extremely fast, flexible and completely menu-driven for ease of use.
  • Designed and written by users for users.
  • You do not put any special functions into your workbooks, which lets you share workbooks with others who do not have the Risk Analyzer. Many other Monte Carlo simulation programs embed special functions that require all users of the workbooks to purchase their expensive programs.
  • Easy to learn — you do not need to attend expensive training courses. Three example files with step-by-step instructions show you how to use the Risk Analyzer, and there is an extensive help file.
  • No annual support contract required to talk to a support person for help. If you need assistance, call us. Our free help does not expire.
  • Your input variables (cells) and their distributions are listed on a special premise sheet for you to conveniently review.
  • Customizable probability distribution. You do not need to create a distribution for each input cell — use one distribution for a group of related cells.
  • Probability distributions can have minimum and maximum allowed values so that you do not get extreme, unrealistic values in your studies.
  • You can have as many input and output variables as you need.
  • Worksheets are created that list all the simulations with the values of all the output and input variables.
  • Easily set your workbook to the input values in any simulation so that you can check your model's calculations, and set it back to its original values once you are done.
  • Easy to understand reports.
  • Select which input and output variables to use when doing a Monte Carlo analysis, so you can perform "what if" studies on any subset of them.
  • Very, very fast — do thousands of evaluations in minutes.
  • "What if" capability that lets you type in a value and see the probability of occurrence for that value.
  • Customizable histograms with step sizes, number of bins (bars), and minimum and maximum values for ease of use and interpretation.
  • The Risk Analyzer add-in is loaded only when you need it instead of loading every time you open Excel.
  • Easy to use installation program.
  • Frequent free upgrades as we add features our users suggest.
  • Reasonably priced.

Questions we get asked

We get asked often if one can use Monte Carlo simulation and the Risk Analyzer for a particular use. Monte Carlo simulation is basically having the Risk Analyzer (or any Monte Carlo simulator) enter random values into two to several hundred input cells, based on probability distributions specified for those cells. The Risk Analyzer then calculates the results, stores them, and repeats. After a number of repetitions, typically anywhere from 2,000 to 50,000, the results are presented in a distribution chart and table for each output cell. If you have a situation that can be modeled in an Excel spreadsheet and have a good idea of the distributions, the Risk Analyzer and Monte Carlo simulation will work for you.

Another question we get asked is how long a simulation takes. Say you are considering investing in a new proposal. Our answer is anywhere from a few hours to a few hundred hours. So where is that time spent?

  • To fully understand the risks, you should spend many hours — if not hundreds — identifying all the factors that will affect the proposal: product price, market size, production costs, and 20 to 30 other factors. For each factor you estimate the range it can be and the distribution (normal or skewed). This work is not done in a vacuum; it is done by interviewing experts and others who have done similar investments. This is 95% of your work.
  • Creating the Excel spreadsheet of your proposal — which gives a single output estimate of net present value, IRR, and cash flows based on the most likely values of all your factors — takes about 10 hours.
  • Next you open the Risk Analyzer for the first time. Working through the examples takes about an hour. Creating a premise file for your study takes an hour or two.
  • Now you run the simulations. Typically 25,000 simulations are needed. This takes 2–5 minutes. Computers are fast.
  • Overall, almost all of your time goes into studying and modeling the proposal, not into using the Risk Analyzer — several hours including learning how to use it.

We sometimes get asked why the Risk Analyzer costs only $49.95, and whether it has all the features of other Monte Carlo simulators. We want to include it in our business and risk analysis collections, so pricing it any higher would make our collection prices look strange — and we want to make it affordable. With regard to features, it has lots of them. Every Monte Carlo simulator has different features, some unique; ours is a risk analysis funnel chart, showing risk over time. We have all the popular probability distributions, all that 99% of users will need, and you can build your own custom distributions. Most importantly, the Risk Analyzer is easy to use.

For a comparison to other risk analysis software, and for features and issues one should consider when purchasing risk analysis software, visit our risk analysis software comparison page.

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