4D Analytics: Unique to Risk Insights

The purpose of Risk Insights 4D Analytics approach is to gain enough information to make a first-pass at estimating and evaluating uncertainty, and to do so in a way that elicits the information in a way that is comfortable for those providing the estimates e.g. not using High-Medium-Low ratings! Undertaking a straightforward first-pass in this way enables decisions to be made on where to focus further activity as required, such as deeper dive analysis or Monte Carlo simulation.

Risk Interconnection Map is an unique way of presenting risk information. Compared to Probability Impact matrices which only display severity and likelihood, the interconnection map enables four dimensions to be visualized:

Risk likelihood – pessimistic and optimistic scenarios
Risk severity – worst-case and best-case
Risk interconnection – identify the connections between risks
Strength of interconnection – identify your most influential and influenced risks

Mapping risk interconnectedness

The financial crisis brought interconnectivity to the forefront of management issues.   Organisations are starting to look into the relationships between risks. The annual World Economic Forum Risk Report charts a range of global risks arising from the new reality of interconnected challenges, interdependent stakeholders, and an accelerating speed of change. The report emphasises the need to appreciate and understand how risks evolve, how they interact to create potential impacts on stakeholders, and what trade-offs are involved in managing them.

When we accept that risk are interconnected it follows that we should consider interconnectivity in our risk analysis and management. When the interconnectedness of events is frequently cited as being at the root of large-scale failure, then why are risks still largely analysed and managed independently or in isolation. While there has been progress in looking at risks from a portfolio perspective and balancing the total amount of risk, more can be done to factor dependencies and linkages in the assessment of risks and how they are addressed.
Identifying and assessing interconnectedness promotes a broader and deeper understanding of the risks to your organisation.  Risk Insights Explorer is a unique tool which can help organisations:

  • Identify relationships between risks
  • Ensure that risk connections are analyzed and addressed
  • Understand the ripple effects of decisions
  • Avoid unintended or unanticipated consequences
  • Inform risk responses and increase the effectiveness and efficiency of risk action plans
  • Encourage proactive communication and engagement.

Risk insights Explorer supports BoE Exploratory Scenarios

Exploratory Scenarios

The Bank of England (BoE) stress tests examine the potential impact of a hypothetical adverse scenario on the health of the banking system and individual institutions within it.

From 2017, the annual cyclical scenario will be complemented by an additional scenario intended to probe the resilience of the system to risks that may not be neatly linked to the financial cycle — the ‘biennial exploratory scenario’.

Risk Insights Explorer’s unique functionality enables Banks’ to map the BoE exploratory scenarios and undertake advanced risk interconnection analysis.

Read more:

The 2017 exploratory scenarios