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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management

Himalaya Motors Ltd's risk committee uses interviews and a risk register to rate risks by words such as 'low', 'medium' and 'high' without assigning rupee values. Which description fits this assessment approach?

This is qualitative risk assessment. Rating risks on descriptive scales like low, medium and high from interviews and judgement, without assigning monetary values, is qualitative. Quantitative methods such as simulation or value-at-risk rely on numerical data and probability models.

  1. AQualitative assessment, based on judgement and rating scalesCorrect
  2. BQuantitative assessment, based on statistical modelling
  3. CMonte Carlo simulation of loss distributions
  4. DValue-at-risk calculation using market data

Explanation

Rating risks as low, medium or high using judgement and scales, without numerical monetary estimates, is qualitative assessment. Monte Carlo and value-at-risk are quantitative techniques needing numeric data.

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