Mastering Risk Management

WHY USE SCENARIOS?

Scenarios are particularly important in risk management because the only other forward-looking, albeit subjective, information is available from risk and control self-assessments. Scenarios usefully supplement and provide challenge to the equally subjective risk and control self-assessments. By having two sets of data challenging each other, both of which have been derived subjectively, better clarity is achieved and a firmer base is available from which to create action plans to enhance risk management, perhaps through improving controls or implementing further controls. Trends in key risk indicators may also be forward-looking, based on actual current and past data. As such, the trends form a useful input when creating scenarios. ...