Why only a quantitative ERM approach will help solve the problems you really care about

Risk management guidelines advise us what a good Enterprise Risk Management (ERM) system should look like. They explain that it should keep a business within the bounds of its risk appetite, should enable risks to be managed efficiently, and help ensure that strategic goals are met. They tell us that qualitative and quantitative methods can be used for evaluating risk.

But the guidelines don’t explain how one uses such data in a risk management system to achieve these various purposes. Qualitative or semi-quantitative systems may allow comparison of individual risks, but they cannot determine the aggregate risk and important risk management questions are always based on an aggregate view of risk: • With all these risks, how likely are we to achieve our strategic goals? • How much capital should we hold in reserve to cover financial losses? • If we eliminate a risk, how much better off are we? • Which investments give the best risk-return balance? • Which entities or operations are disproportionately risky? • How much insurance cover should we purchase?

Switching from qualitative to quantitative descriptions of risk elevates risk management from a compliance reporting exercise to a valuable business tool. And it’s easy to make that switch too. David will explain how.


Handout and slides

About The Speakers

David Vose

David Vose

Director, Vose Software

One of the most recognized names in risk analysis, David has been involved in quantitative risk analysis for over thirty years, working as risk analyst, adviser or expert witness in fields as diverse as insurance claim disputes and food contamination, wind turbine operations and diamond mining, nuclear power station decommissioning and banking OpRisk. He is the author of three risk modelling textbooks, over twenty peer-reviewed papers, and has authored or edited guidelines for several international bodies. He has developed and popularized many of the risk modelling techniques that are in current use.