Scenario analysis

Scenario Analysis (SA) is an assessment technique that is used to identify and measure the potential occurrence of operational risk events. Unlike traditional operational risk assessments, it is a forward looking “what if” analysis.

Scenario Analysis is designed to derive reasoned assessments of the likelihood and impact of plausible operational losses from business and risk management experts. It is often used to identify and measure events with low frequency but high severity losses, for example, natural disasters, terrorism, and rogue traders. Along with its qualitative elements, it is often used as a direct input into a firm’s operational risk capital estimate. You can use the Scenario Analysis process in OpenPages® to construct Scenario Analyses and collect supporting qualitative and quantitative data. Scenario Analyses are typically created for Business Entities and assigned a Risk Category. You can also associate supporting ORM data, for example, risk assessments, relevant loss events, ORIC losses, ORX losses, and risks. Within each Scenario Analysis, you can record a range of frequency and severity estimates in buckets along with supporting information for the assessment. After the Scenario Analysis is complete, you can run the Scenario Analysis Completion Helper to finalize the assessment and create the Scenario Analysis Result object.