Monte Carlo

What is Monte Carlo Analysis?
Monte Carlo simulation is a computerized mathematical technique that allows people to account for risk in quantitative analysis and decision making. The technique is used by professionals in such widely disparate
fields as finance, project management, energy, manufacturing, engineering, research and development, insurance, oil & gas, transportation, and the environment (Palisade, n.d.). From the definition and the reading
in chapter 10, MCA helps on risk analysis. In aviation we have indicators that shows and tells us if there is a discrepancy or an error. For this system to function, lots of tests took place so the system recognizes these
types of errors. Monte Carlo is an equation that calculates risks, in aviation this method is important because the essence of the equation has been put in practice. “Depending on the objective of the risk analysis, risk
modeling typically provides the following outputs:
estimates of risk at predetermined levels of confidence
a risk profile that ranks events in order of decreasing risk values
an exposure profile that indicates the range of consequential cost for risk events”. (Stolzer, 2015)
These points I highlighted them because its essential in the Monte Carlo Analysis and gives more understanding of how the system works and it all depends on the outcome the individual is hoping for. On the
book, page 248, Table 10.4, gives an example of the equation to solve problems with MCA. The depiction of the risk analysis is like a mountain, based on the numeric values and the inputs given to the system it will
calculate where it will have the higher index of risk. This program is used on Microsoft Excel mostly. Monte
Carlo can help an organization to change the way of notification of risks and implement new indicators for risks.
It can change the behavior of the safety system and help out on risk mitigation.
References
Palisade (n.d.). Monte Carlo Simulation. Accessed March 23, 2021. Retrieved from
https://www.palisade.com/risk/monte_carlo_simulation.asp
Stolzer, A. J., & Goglia, J. J. (2015). Safety management systems in aviation. Burlington, VT: Ashgate.