Risk and Insurance Management Society (RIMS) Certified Risk Management Professional (CRMP) Practice Exam

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When assessing potential risks, what technique helps to identify both frequency and impact?

Qualitative analysis
Quantitative analysis
SWOT analysis
Scenario analysis

The correct answer is: Quantitative analysis

Quantitative analysis is an effective technique for assessing potential risks as it uses numerical data and statistical methods to measure and evaluate both the frequency and impact of risks. By applying quantitative analysis, risk managers can convert uncertain risk estimates into measurable variables, allowing for a more structured approach to risk assessment. This method often involves calculations that include the likelihood of occurrence (frequency) and the potential cost or consequence of risk events (impact), thus providing a comprehensive overview of the risk profile. The ability to derive clear, numerical values from data enables organizations to prioritize risks based on their potential severity and occurrence probability, thus facilitating informed decision-making in risk management strategies. This method is particularly advantageous in situations where historical data is available, allowing risk managers to utilize mathematical models to predict and quantify potential risks effectively.