From the AEGIS e-Journal, Volume 10 Number 11, November 2007
TreeAge Pro TreeAge Software, Inc. $100 – $500, depending on version http://www.treeage.com/ 1-413-458-0104 How do you decide what to do? Often, decisions are made based on gut feel, rather than careful analysis, even if there is information available that could help you make a more rational decision. TreeAge Pro is a software tool that allows you to build decision trees to analyze a decision process and help recommend the best option based on expected results and probabilities. While not perfect – the nature of probability is such that decisions are a gamble, and even if you take the winning end of a gamble you can still lose – it is nonetheless an excellent tool, and one that can help you make better decisions. We were introduced to TreeAge at IPCI 2007 by speaker Robert F. Copple, who uses it to value IP litigation. We tried TreeAge to model implementation or non-implementation of an OPSEC program, which we showed in the October 2007 issue of ÆGIS. We started by figuring out what we know. Working backwards, we know that the cost of the average loss in a manufacturing environment is $50 million. We also know that if we encounter one incident we more often than not encounter another two. This puts the theoretical potential loss of revenues at $150 million. Let us also assume a cost for a fully functional OPSEC program to be $1 million. This figure is high, but a nice round sum. We also assume that a company that has implemented an OPSEC program has a much lower probability of being a victim, and that, if they are a victim, that there will more often than not be only one incident that slips through. Finally we assume that a company has the choice to implement internal controls or not implement internal controls. Note that the likelihood of being a target is not affected by the presence or absence of an OPSEC program, but that the likelihood of becoming a victim decreases when there are adequate internal controls in place. ÆGIS, November 2007 10 With this information in hand we opened the somewhat-intimidating 600- plus page user manual. Fortunately, for our simple model we only needed the first two chapters to figure out how to make the program run. Clearly the program contains quite sophisticated mathematical powers that we didn’t needwhat we were trying to do. But your planning people, who actually understand things like Markov Monte Carlo Microsimulation will not be disappointed in the least. We were able to use TreeAge to plot our decision tree
Once we had this, we clicked on the rollback icon, and it calculated the costs
So what did our model reveal? That if you have $150 million in revenues at risk in an operating unit, your revenues will likely be $75,500,000 higher if you implement an OPSEC program than they would be if you chose not to implement an OPSEC program. The nice thing about TreeAge is that if someone disagrees with your assumptions you merely plug in their numbers, click the rollback icon, and ÆGIS, November 2007 11 look at the new figures. You can, of course, also use sensitivity analysis to examine the effect of changing the assumptions. While conceptually complex, TreeAge is simple to operate, and will allow you any degree of sophistication you are likely to be able to handle. Even if you are not an MBA or a mathematician, if you are responsible for making decision, TreeAge is an excellent tool to help you make them, and make them better. We recommend TreeAge for your consideration. 7. Subscription/Unsubscription/Copyright Information •• ÆGIS is supported and maintained by voluntary efforts. This publication is owned, published, and copyright © 2007 by The LUBRINCO Group Ltd, Inc. and Financial Examinations and Evaluations, Inc. It is edited jointly by Richard Isaacs (RBIsaacs@lubrinco.com), L. Burke Files (LBFiles@feeinc.com), and Terry Philips (TPhillips@aegisjournal.com). LUBRINCO provides services in three high-threat areas, too specialized to be dealt-with in-house, that can adversely affect domestic and international bottom lines. • Identification, valuation, and protection of intellectual assets and critical information. • American businesses lose $300 billion in revenues annually to competitive intelligence, economic espionage, inappropriate disclosure, and information theft. • LUBRINCO provides private sector consulting access to OPSEC, the government-standard process for identification, valuation, and protection of intellectual property and critical information. • Implementing an OPSEC program is likely to increase revenues for an at-risk operating group by $75 million. • International asset location and due diligence. o Location of concealed assets in fraud, theft, and divorce. o Due diligence to prevent fraud and loss in China, Central and Eastern Europe, Central Asia, the offshore financial centers, Latin America, and the Caribbean. o Financial fraud, anti-money laundering, and anti-corruption program development and training. ÆGIS, November 2007 12 • Protection of management, staff, and families. o In the high-threat environments of Latin America, Africa, the Mid- East, and Southeast Asia. o When traveling and living overseas. o When transporting items of substantial value. LUBRINCO identifies and quantifies threats and vulnerabilities, and their associated risk, then manages the vulnerabilities so you can transfer or live with the residual risk. We prevent disastrous financial loss to your company, and physical harm to you, your family, and your staff. For information on LUBRINCO and its services, or for the archive of all past issues of ÆGIS in PDF format, please go to http://www.aegisjournal.com/. Subscription to ÆGIS is available for $15 per year in North America and $20 per year outside of North America. To sign up for a complimentary subscription to ÆGIS or the ÆGIS PDF notification list, send an email to subscribe@aegisjournal.com. To subscribe to our AvantGo channel, go to http://avantgo.com/channels/_add_channel.pl?cha_id=1773 To be removed from the subscription list, send an e-mail to unsubscribe@aegisjournal.com. If you know of anyone else who should be receiving ÆGIS, please send their e-mail address to subscribe@aegisjournal.com. If there is a topic that you would like to know more about, send it to editor@aegisjournal.com and the editors will consider it as the topic for an article in an upcoming issue. If you would like to submit an article for publication in ÆGIS, send it as an attachment to an e-mail to editor@aegisjournal.com. Submission of an article certifies that (a) all information in the article is in the public record, or (b) that you are authorized to release any personal or corporate proprietary information contained in the article, and (c) that none of the article has previously been copyrighted. The submission of materials for publication in ÆGIS constitutes a license to LUBRINCO, and/or Financial Examinations and Evaluations, Inc, their assigns, associates, or affiliates, to abridge and/or edit said submission, and to copyright and publish/republish any submitted materials in whatever written and/or electronic form they may choose. ÆGIS, November 2007 13 If you would like to go beyond normal fair-use in reproducing articles from this issue of ÆGIS, you may do so freely as long as appropriate source, copyright, accreditation, and link to the ÆGIS Web site is included. This should be in the form
Article Title, from the November 2007 ÆGIS (© 2007 LUBRINCO & FEEINC), to be found at http://www.aegisjournal.com/. ÆGIS is a forum for the exchange of information, ideas, operating styles, theories, and related topics for corporate managers who make decisions about threats typically outside the expertise available in-house, yet which have the potential to affect their company’s domestic and international bottom lines. Nothing appearing in ÆGIS should be construed as legal advice. The information provided is “general information,” not “specific advice.” The solution to any problem is highly dependent upon the precise facts involved. Thus, before making any reliance upon anything said here, you should consult with an appropriately skilled professional. Opinions expressed by contributors are not necessarily endorsed by the publisher, and may be presented to encourage a dialogue among subscribers. The publisher and any re-publisher cannot be held responsible for any loss incurred as a result of the application of any information published in ÆGIS. Please be safe, and be smart.