Key risk indicator and Model: Difference between pages

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A measure which quantifies an important risk to which the organisation is exposed.
A representation of a real situation using a selected set of simplifying assumptions and relationships.  
== Example ==
A Inc operates in the capital goods sector and regularly makes tenders in foreign markets. The tenders are based on foreign exchange rates prevailing at the time of bid but there is risk in the tenders which is difficult to hedge because there is uncertainty over whether the tenders will be accepted.
 
 
A Inc's key risk indicators for this risk measure the following:
:*number of bids outstanding
:*size of exposure in bids outstanding
:*length of tender and
:*volatility of currency pairs involved in tender
 
to produce an overall measure of risk for tenders.
 
The risk in tenders is then given a budget for overall risk, which is managed by the tendering team and their treasury colleagues.
 


In finance, financial models are widely used as tools for valuation and to support financial decisions.
An important benefit of well-structured financial models is to facilitate sensitivity analysis.


== See also ==
== See also ==
* [[Canary in the coal mine]]
* [[Financial model]]
*[[Early warning indicator]] (EWI)
* [[Modelling]]
* [[Key]]
* [[Scenario analysis]]
*[[Key control indicator]] (KCI)
* [[Sensitivity analysis]]
*[[Key performance indicator]]  (KPI)
* [[Stress test]]
*[[Risk budget]]
   


[[Category:Compliance_and_audit]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]

Revision as of 14:20, 23 October 2012

A representation of a real situation using a selected set of simplifying assumptions and relationships.

In finance, financial models are widely used as tools for valuation and to support financial decisions. An important benefit of well-structured financial models is to facilitate sensitivity analysis.

See also


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