SAARC FINANCE,
REGIONAL SEMINAR, ISLAMABAD
41
Risk Measurement - Insights
• Benefit of Decision Models: they are based on
vast quantities of data statistically
tested, and also because they
avoid common biases that undermine human
judgment.
• Managers and Users of decision
models sometimes forget that so much of life is
about getting things done, and
not predicting things we cannot control.
• Adequacy (both
in terms of data size and number of years) is essential for a good
decision model.
• Reliance on
decision models should only be to the extent of an aid to human
judgment in decision making.
• Model Risk:
Models are themselves not free from risk
• Models needs
constant improvement based on comparison with actual outcome
and tweaking to evolve as a better
predictive model.