Chapter 7: Scenario Assessment Flashcards
What are Direct Impacts?
Examples.
Financial losses such as money, legal, fines and replacement costs.
What are Indirect Impacts?
Reputation damage resulting in customer loss or higher funding costs, with regulatory scrutiny
What is meant by Post-Event mitigation?
Before what?
Consider impacts after mitigation, but before insurance.
When assesing scenarios, how might a firm ensure business relevance?
- Link to business reality.
- Use of benchmarks
What is “Expert Judgement”, regarding assesment techniques?
Gathering insights from subject matters to give their opinion and estimate potential impact.
What are the Pros of Expert Judgement?
- Cost effective and fast
- Leverages experience
What are the Cons of “Expert Judgement”?
- Highly subjective + bias prone
- Results can vary based on experts
- Increasingly less respected by regulators due to unreliability.
What is “Systemic Estimation and Mitigation of Bias”, as an assesment technique?
Uses structured questions and historical benchmarks to guide expert assesments aiming to reduce common biases.
What is “Recency Bias” and how can this be mitigated?
- Recent events are perceived as more likley.
- Use long term data plans for stable risk and short term for more evolving risks.
What is “Anchoring Bias” and how can this be mitigated?
- Initial information skews future judgements.
- Mitigated by collecting silent estimates before group discussions
What is “Confirmation Bias” and how can this be mitigated?
- Seeing only information that confirms existin beliefs
- Mitigated by encouraging diverse viewpoints and challenge discussions.
What is “Group Polarization Bias” and how can this be mitigated?
- Groups may adopt more extreme positions than individuals.
- Mitigated by structured facilitation ensure all voices are heard
What is the “Delphi Method”?
A structured iterative process for pooling expert judgements, often used in opinion surveys and scenario assesments.
What are the steps to the “Delphi Method”?
- Silent collection: Experts individually provide assesments.
- Disclosure: Responses are shared amungst the group
- Reassessment: Participants can revise their estimates.
- Final Estimate: Calculated as a weighted average.
What is the (Delphi Method) equation?
(Lowest response + (n-2) x average response) + highest respone / number of participants (n)
What is “Fault Tree Analysis”?
A deductive method that breaks down scenarios into a series of conditions and failures necessary for an event to occur.
When and why might a “Fault Tree Analysis” be used?
- Used in high risk industries e.g. aerospace
- Helps identify control dependencies
What is the process of “Fault Tree Analysis”?
Tree…..compost……decompose?
- Decompose the event into individual failure events
- Assess the probability of each event and their probability occuring
- Calculate the overall scenario likelhood product of individual probabilities
What is the “Bayesian Model”?
Uses what type of probability?
These models use conditional probability to update likelihood assessments based on new information and expert opinions.
When might “Bayesian Models” be used?
- Useful for scenarios where events are interdependent
- Allows for dynamic updating of risk assesments
What is “Bayes Theorum”?
Provides a mathematical framework for calculating conditional probabilities, enhancing robustness of scenario assesments.
Why are “Bayes Models” effective?
2 reasons.
- Reduce subjectivity
- Regulatory expectations - reliable
