Information is power and quantitative analysts are the statistical and mathematical experts who evaluate and report on financial trends, markets, and activities. The deciding factor in many important business decisions depends on their results-driven insights.
Quantitative vs. Qualitative Risks
Qualitative risk analysis is scenario- and subjective-based assessments that use unquantifiable data, such as industry cycles, labor relations, and R&D strength, to examine operations and potential risks. On the contrary, quantitative risk analysis assigns numerical values to risks and potential loss components. Although qualitative risk analysis is generally easier to do, quantitative risk analysis is more accurate and objective. It is a powerful selling tool that can be modified and enhanced to meet specific needs and requirements. Irrefutable facts and quantitative results will minimize managerial disagreements.
Quantitative risk analysis often benefits different business professionals in different ways. For example, executives and upper management will enjoy a standardized way to justify, discuss and fund projects. Quantitative risk analysis is less susceptible to office politics issues, reduce the time consumed for assessing proposal validity and allow the results to be quickly aligned with the company’s financial objectives and performance. Sales consultant and business development professionals can use quantitative risk analysis to attract new partners and opportunities through more accurate ROI predictions.
The Science Behind Quantitative Risk Analysis
Quantitative risk analysis generally follows a step-by-step process to achieve results. First, there is a risk assessment and vulnerability study to identify the risk factors. This will help determine the top threats to the tangible or intangible assets. Then, the quantitative risk analyst will determine the exposure factor (EF) for each asset in order to calculate the single loss expectancy (SLE), the annualized rate of occurrence (ARO) and annualized loss expectancy (ALE).
Quantitative analysts help management identify and select the best countermeasures for each risk factor. Their data-driven results help to create better action plans, higher ROI results, and more cost-effective solutions.