Fighting the cognitive biases that undermine scenario analysis

Risk managers should be aware of unconscious flaws in estimation

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In operational risk, scenario analysis plays an important part in risk management and capital modelling. However, in contrast to the other quantitative tools available to operational risk managers, scenario analysis relies on subjective "expert judgement" that can affect the accuracy of predictions, as the process is exposed to unconscious cognitive bias. And whether or not we are aware of it, we are the victims of psychological bias with every decision we make.

"As a species, humans are not

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Investment banks: the future of risk control

This survey report explores the current state of risk controls in investment banks, the challenges of effective engagement across the three lines of defence, and the opportunity to develop a more dynamic approach to first-line risk control

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