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Archived updates for Thursday, May 19, 2005

Simulation for Legal Resource Allocation

According to an intriguing article by Ellis Mirsky pointed out by Rees Morrison in Law Depratment Management, "monte carlo" models of litigation inventories can assist in producing sensitivity analyses that enable companies to determine where best to allocate their limited resources (e.g., money and executive and attorney time) for optimum results (e.g., maximizing the use of external funding, such as insurance, indemnities and subsidies, while minimizing the use of company cash). In addition, these sensitivity analyses enable managers to establish a suitable litigation reserves with confidence levels that will satisfy auditors. Mirsky reccomends the Crystal Ball software from Decision Engineering.

Anyone who has every gotten and MBA, studied operations research, and/or worked in the oil industry (like me) can attest to the fact that such simulations are relatively easy to configure, and even easier to explain to non-technical managers such as most general counsel.

Feel free to contact me for more information on portfolio risk appraisal techniques for your law department. You can also learn more about risk, return, and portfolio characteristics from William F. Sharpe's "Macro-Investment Analysis." And, for a lighter read on portfolio risk appraisal theory, check out Burton G. Malkiel's classic "A Random Walk Down Wall Street."
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