Biases in scenario analyses and how to mitigate them

Claudia Meyer and Andreas Seibt





Introduction to Part I: The origins of non-financial risk management


The complete history of operational risk regulation (abridged)


Financial institutions and non-financial risk: Learning from the corporate approach


The painful financial side of NFR


“Risk management is about managing risk” and “It’s all about people”: Psychology might be more important than models


The confusion of Babel: What’s in the name NFR – taxonomy

Introduction to Part II: Governance of non-financial risk management


“It’s the culture, stupid”: Risk culture as the key building block of NFR management – and why some banks have come through the Covid-19 pandemic better than others


Do you know who is who? Three lines of defence in the context of NFR


Herding cats? NFR divisions as truly diverse units


“Just do it!”: Partially self-organising governance structures for NFR frameworks

Introduction to Part III: Tools and instruments for non-financial risk management


A risk by any other name: Identification, classification and agendas


Old but gold? Mastering the RCSA despite Covid-19


Biases in scenario analyses and how to mitigate them


When scenarios are not severe enough: Stress testing for non-financial risk


Ending NFR in NFR: From Excel sheets to professional IT systems for NFR management


Breaking up with risk management: Using the power of controls for good not the prevention of evil

Introduction to Part IV: Focus areas of non-financial risk management


It won’t be over after Covid-19: Pandemics and operational resilience


Dealing with IT complexity and innovation: Delivering business resilience and customer outcomes


Protecting the new gold: Information security


Conduct risk and the impact of Covid-19


From lawsuits to models: Compliance risk and financial crime


Others are doing it cheaper: But can they really? Opportunities and risks in outsourcing


Managing reputation and stakeholders

Introduction to Part V: The future of non-financial risk management


ESG risk as a new (and very important) trigger for NFR


Looking into the crystal ball: What will NFR management look like in 2030?


This time will be different: An alternative future of NFR management


Right time, right place: The drive for change in operational and non-financial risk

In our role as risk managers, we were sitting in a room with more than 10 people from the business of the company – all very senior persons from different departments but the same management level looking at us while talking to each other. They were all invited to assess one single scenario in a workshop, and we were aware that we are keeping them from their normal work of generating profit and serving customers. We estimated the opportunity costs: one hour with 10 senior managers would easily total €30,000 to €50,000. However, it was important for us to have many different views at the table, first to have a common understanding of the storyline of the scenario and second to properly assess and discuss the parameters for the scenario to avoid human biases as much as possible, especially any political intentions (such as using the outcomes to get more budget).

The day before we had thought about how to start. Should we provide them with all available figures – from internal and external losses, issues and/or findings, key performance indicators or key risk indicator metrics, as well as external factors – or just explain the storyline of the scenario, getting an agreement for it

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