Op Risk Looks Back... To the 18th Century

The 300-year-old statistical methods of Thomas Bayes are experiencing a renaissance.

Can an eighteenth-century Presbyterian minister help solve the data problem of operational risk? Many software vendors and operational risk managers think so, and they are turning to the 300-year-old statistical methods of Thomas Bayes to measure and manage operational risk for their organizations.

Bayesian methods, as these statistical methods are called, are based on Bayes’ mathematical principles that let scientists combine objective data with prior beliefs. Though statisticians have

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