Dynamic Risk Assessment provides insights into risk that can enhance capital allocation, decision-making, resilience and agility.
DRA can help to enhance capital allocation, decision-making, resilience and agility.
For decades, organisations have used a two-dimensional approach to predict risk, grading individual risks according to their likelihood and severity. But this method is increasingly incapable of foreseeing and preventing crises that arise from complex chain reactions and tipping points.
KPMG Dynamic Risk Assessment (DRA), by contrast, investigates the structure of the whole risk system to understand the connections between risks and the speed at which risk impacts could occur.
DRA provides a three-dimensional and dynamic view of risk. It helps organisations make better-informed decisions by understanding what can happen when individual risks combine and interact. It also helps to identify the most effective intervention points to reduce the likelihood and severity of risk clusters and turn challenges into opportunities.
How Dynamic Risk Assessment works
The foundation of DRA is 'expert elicitation': a synthesis of expert opinions. DRA uses human beings as a core tool for risk forecasting because, unlike historical data, human beings are capable of looking forwards as well as backwards.
The KPMG Dynamic Risk Assessment process begins with collecting opinions from experts both within the organisation and, where appropriate, from outside. Using expert elicitation, DRA taps into the 'sensing capacity' of the experts to draw up a risk list, assess the likelihood, potential impacts and velocity of the risks, and to map the connections and relationships between them.
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