Qualifications on Quantification -- Is Risk by the Numbers All It's Cracked Up to Be?

by Carl Pritchard

A client recently solicited my help to run an extensive set of Monte Carlo analyses on their projects. It seemed a compelling prospect at first, but as I examined the opportunity more closely, I instead offered it to a peer, seeing it as definitely more of a numbers-crunching exercise, rather than an examination of overall risks in their program. The more I thought about it, the more I realized that while risk quantification has extraordinary appeal and comes across as being the most thoughtful approach to risk analysis, the reality is that the numbers game is fraught with pitfalls. If organizations cannot be led to understand the nature of those pitfalls, the value of the numbers generated by any quantification process will be severely diminished.

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Qualifications on Quantification -- Is Risk by the Numbers All It's Cracked Up to Be?Thu Sep 13 08:12:42 CDT 2007