ERM concepts and Risk categorisation [12]

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Bullet points include: Decomposition of problem into two parts Likelihood and Impact E.g. Default risk: Loss Given Default (LGD) x Probability of Default (PD) Impact might only be quantifiable in a relatively imprecise manner Likewise occurrence probabilities might only be assessable approximately Or might be defined in this manner to make the analysis simpler for boards / senior management / others to understand Particularly if outcomes only loosely quantifiable

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