Risk Measurement

From Open Risk Manual

Definition

Risk Measurement (also Risk Quantification) is a broad term denoting any activity aiming to quantify (produce numerical measures) risks to an organization. The risks in scope for measurement are normally thought to have been isolated in the Risk Identification process that logical precedes Risk Measurement

Measurement Approaches

Depending on the risk type being measured there is a large variety of quantification methodologies and tools. In the more narrow context of Quantitative Risk Management, risk measurement becomes substantially delegated to the application of a Quantitative Risk Model

Issues and Challenges

  • Non-quantifiable risks. Various risks might be by nature too difficult to quantify in a reliable manner. For regulated firms supervisors may still require these to be assessed in some other way (ie expert judgment) and to be managed through limits, controls and management oversight. [1]

See Also

References

  1. Basel Committee on Banking Supervision, "Overview of Pillar 2 supervisory review practices and approaches", June 2019

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