Risk Analysis

Michael L 15/01/2016

Whether you’re a rocket scientist, a neural surgeon or a simple student of risk management, you need some sort of textbook to provide guidance along the way. This is where Risk Analysis by David Vose comes into the picture. It is a 700 page brick, that deals with all the basic concepts, methods and calculations needed to get started on a career within operational risk management. In other words, it’s as close to an ABC on practical, operation risk analysis as it gets. As it quickly becomes evident from the table of contents, the book covers everything from the required math and statistics to guidance on decision bias and the collection of expert opinion, to the quantitative modelling of processes and processes, to using the Bayesian network approach, and to the validation of your model. It even gives you guidance on how to document your results. While it can’t stand alone in an educational setup, it definitely goes a long way. Let’s be frank, it’s no page turner. It is about as boring a read as any other slightly mathematical oriented textbook that isn’t part of a series of lectures and I wouldn’t recommend anybody to read it from one end to the other. I became acquainted with it during a university course (for which it is great) and have since been using it as an encyclopedia whenever I to need refresh anything. The book relies heavily on the ModelRisk add-in for Excel. It’s actually a lot less annoying than you’d think, partly because the book comes with a free 90 day license and partly because it’s an easy way to refer to (and show examples using) the stochastic distributions.