[[Wiki]] / [[Actuarial Techniques]] / ==Risk Assessment== > ==Risk Assessment== is the analysis of uncertain future events. ## Risk Assessment Techniques There are two broad categories of risk assessment techniques: | Technique | Description | | -------------------------------- | ----------------------------------------------------------------------------------- | | **Quantitative risk assessment** | Analyzes quantitative data about events with tools like statistics. | | **Qualitative risk assessment** | Analyzes situations and outcomes with tools like words, logic, and categorization. | ### Risk Identification > Risk identification is the process of seeing, naming, and categorizing a risk. | Risk Identification | Description | | --------------------------------------------- | ----------------------------------------------------------------------------------------------- | | [[Cynefin Framework]] | Process to make sense of a situation with uncertainty. | | [[Cindynic Approach]] | Identify value-aligned actions towards goals and purposes. | | [[Risk Management Policy]] | Specify how your organization responds to and controls risk. | | [[Risk Appetite\|Risk Appetite Statement]] | Specify "Do and Don'ts": how much risk the organization is willing to take. | | [[Risk Taxonomy]] | Give each risk a name and classification according to its characteristics. | | [[Scenario Analysis]] | Explore future events by analyzing alternative possible outcomes. | | [[Structured What-If Technique (SWIFT)]] | Structured brainstorming with prompts. | | [[Failure Modes and Effects Analysis (FMEA)]] | Review all system components to identify potential failure modes, and their causes and effects. | | [[Risk Register]] | Documents risks in a register with owners and controls. | ### Risk Analysis > Risk Analysis is the systematic process to comprehend the nature of risk by seeking new knowledge.^[[[Society for Risk Analysis Glossary]]] | Technique | Description | | -------------------------------------- | -------------------------------------------------------------------- | | [[Scientific Method]] | Establish facts through experimentation and observation. | | [[MECE Principle]] | Break down a problem into its component parts. | | [[Bayesian Analysis]] | Update the probability of hypotheses by evaluating facts. | | [[Bow-Tie Analysis]] | Visualize causes and consequences of risk in a diagram. | | [[Exploratory Data Analysis (EDA)]] | Explore the structure and nature of your data. | | [[Markov Analysis]] | Predicts future system states using probabilities of current states. | | [[Simulation\|Monte-Carlo Simulation]] | Generate simulated outcomes using random variables. | ### Risk Measurement > Risk measurement is the process of assigning a number to an event. A **risk measure** is a mapping from a set of random variables to the real numbers.^[[Wikipedia - Risk Measures](https://en.wikipedia.org/wiki/Risk_measure)] $ \rho : \mathcal{L} \to \mathbb{R} \cup \{ +\infty \} $ | Risk Measure | Description | | --------------------------------- | ----------------------------------------------------------------------------------- | | [[Variance]] / Standard Deviation | The dispersion of data points around the average. | | [[Beta Coefficient]] | Systemic risk in a financial portfolio relative to the market. | | [[Sharpe Ratio]] | Risk-adjusted return, calculated as the excess return per unit of risk. | | [[Loss Frequency]] | The chance of an event occurring, often expressed as a percentage or probability. | | [[Loss Severity]] | The extent of damage or impact an event might cause. | | [[Expected Loss (EL)]] | The average loss, calculated as Probability x Impact | | [[Value at Risk (VaR)]] | The maximum expected loss over a specified time period at a given confidence level. | | [[Tail Value at Risk (TVaR)]] | The expected loss beyond the VaR threshold, focusing on tail risk. | | [[Key Risk Indicator]] | Operational metrics used to monitor risk levels and provide early warning signals. |