Analyzing What Happened

Risk analysis involves more than just studying the likelihood of events. To obtain a complete picture, you must also analyze the specific losses of actual risk events as well as the causes of those events. In other words, sometimes it’s very useful to look to the past to help predict the future. This is particularly applicable in the case of financial and operational risks, where there is a reasonable possibility that similar sorts of events could happen again. As with likelihood or probability of loss, it is important to develop a rating system for these sorts of events that focuses on the severity of the event. That way, you can repeatedly identify the effect before it occurs.
For each risk of a particular type, there ...

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