Mastering Risk Management

ANALYSING RISK Events

Use of events

Causal analysis of events is critical for effective risk management. The analysis can be used to challenge risk assessments and control assessments, to validate indicators and to assist in the production of scenarios and stress tests. In addition, losses can be used in mathematical modelling for economic capital allocation (see ‘What data do I need for modelling risk?’ in Chapter 10, How do you model risk management?).

Causal analysis and controls

The start of the causal analysis of an event is typically to determine which control or controls have failed. There are often a number of preventative controls whose combined failure has led to an event occurring; some detective controls may also have failed. It ...