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Put a Triangular Distribution on it and Call it Good?

If a builder came to your house to start renovation work clutching nothing but a hammer, you'd probably be a little concerned. He might try to assure you that he is very skilled with his hammer, but you’re still probably going to look for another builder who knows how to use a few more tools.

Looking at the risk analysis models people write, we are often reminded of the phrase ‘When all you have is a hammer, everything looks like a nail’. Many people never get beyond using a Triangle distribution, certainly most others will not venture beyond adding the Normal and Lognormal to their tool belt.

It’s a shame. Risk analysis can and should be a lot more than just adding Triangle distributions to a spreadsheet model and hitting the 'run' button. Many different types of distribution have been developed, and for very good reasons. At one end of the spectrum are distributions that are elegant, convenient solutions to otherwise very complicated problems, and at the other end there are distributions that are simply really useful shapes.

ModelRisk puts more than 120 types of distribution at your fingertips. That’s a lot, we know. Probably only a few of them will be useful to you, but the ModelRisk interfaces and help file will allow you to figure out out very quickly which ones they are.

So, we invite you to give it a go. Throw away the ‘hammer’ and take a little journey through the world of probability distributions. You might find it fascinating, you might find it a little daunting at first, but we are certain you will find it useful. Interested? Then click below to download the free guide to distributions, and if you have any questions give us a call.

Selecting the Appropriate Distributions for your Model

The precision of a complete risk analysis relies heavily on the appropriate use of probability distributions to accurately represent the uncertainty, randomness and variability of the problem. In our experience, inappropriate use of probability distributions has proven to be a very common failure of risk analysis models. It stems, in part, from an inadequate understanding of the theory behind probability distribution functions and, in part, from failing to appreciate the knock-on effects of using inappropriate distributions.

In our extensive help file we discuss the basic properties of distributions and how these properties should be used to select the right distributions in your model. The four properties are:

Download our Guide to Probability Distributions

We offer a free pdf guide to probability distributions that will help you find the most appropriate distribution for your problem. Download a copy of the guide here or contact us for a free, no-obligation web-based meeting to review your current risk management strategies at your company.

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