Forecasting is the key to any businessperson’s ability to weather “risk” storms. Yet even seasoned risk professionals sometimes lose sight of the importance of looking to the future. All too often risk managers fall into the trap of relying only on analyses of past behavior to make assumptions about future behavior. Sometimes, however, the only way to predict the future is to stare straight into it, rather than turning our heads to the past.
When forecasting risks, you need to understand and try to gauge the following four essential characteristics:
◆ How risks behave
◆ When they are likely to materialize
◆ Their potential size
◆ What can be done about them
In this chapter and Chapter 10, you will be introduced to some specific ...