Mastering Risk Management

INTRODUCTION

Scenario analysis is an essential tool for a firm’s planning and risk management processes. It is rooted in the firm’s business and strategic objectives and should form part of the process of identifying those objectives through challenging them. Scenarios alert the firm’s management to adverse unexpected outcomes, beyond those which have been identified in risk and control self-assessments or modelling, and supplement other risk management approaches and measures. Scenarios are not forecasts of what is likely to happen; they are deliberately designed to provide exceptional, but plausible, possible outcomes. They are necessarily forward-looking and therefore involve an element of judgement. Finally, they are invaluable during periods ...