9.4 Risk assessment techniques Flashcards
Risk assessment techniques assess the p________ and i_____ of a risk event to help determine the level of exposure.
probability
impact
Which guidance note provides guidance on the use of risk assessment techniques?
ISO 31010:2009: Risk Management - Risk Assessment
What are the two broad categories of risk assessment techniques?
Qualitative
Quantitative
What is the most common qualitative risk assessment technique?
Risk matrices of probability versus impact, using scales typically of 1-3 or 1-5.
Qualitative risk matrices use “ordinal” values. What does this mean?
The values used are relative (e.g. a scale of 1 to 5), but not a true scale (i.e. a score of 5 does not meant the risk is 5 times greater than a 1)
Quantitative risk assessment uses the principles of s__________ a_______.
statistical analysis
In theory, quantitative analysis is superior to qualitiative. Why is this?
Quantitative analysis uses data rather than subjective judhement.
In pratice, why is quantitative analysis not always superior to qualitative?
Data is not always available, and what happened before is not always a good indicator of what will happen in future.
What is meant by a hybrid approach to risk assessment?
An approach combining both quantitative and qualitative elements of risk assessment.
What are two common approaches to hybrid risk assessment?
Stress testing
Scenario analysis
Describe stress testing.
A risk assessment technqiue involving assessing the impact that extreme movements in key financial variables may have on an organisation.
What is a reverse stress test?
An approach to stress testing that starts with the point at which the organisations objectives are no longer achievable.
What is scenario analysis?
A strategic planning tool where experts and managers determine plausible but extreme future scenarios and then assess the impact on an organisation should the scenario occur.
What are the two principle types of scenario analysis?
Single ariable scenarios
Multi-variable scenarios
