Scenario Analysis

By Sergio Scandizzo


In the Introduction we discussed some of the ways in which risk management can fail. One such failure is a consequence of the assumption that risk can successfully be modelled on the sole basis of historical information or, otherwise said, that we can form a picture of the future by taking a sufficiently sharp look into the past. If historical data is not enough to obtain a reliable estimate of future risks, what is the alternative? Or, rather, what can be done to complement historical analysis