If there’s one thing I have come to appreciate about ERM, it’s the number of perspectives around a given topic and the intense debate that often ensues. I always enjoy learning what other people think about a given topic and why.
In the ERM space, this means debates around risk assessment techniques (mostly), risk appetite, and even how we should be referring to risk management itself. Discourse can get a little heated sometimes…
In the interest of presenting readers with a balanced view on these and other topics, I recently had the pleasure of speaking with Graeme Keith, who is currently working as Services Lead for Risk Quantification for ERM software provider Archer Integrated Risk Management. Graeme has over two decades of experience in harnessing mathematical models for business decision-making.
I’ve spoken with Graeme one-on-one over the years as colleagues, but he graciously allowed me to hit the record button and “interview” him on his perspective on qualitative vs. quantitative risk assessment methods, heat maps, and more.
As you will see, Graeme’s perspective, somewhat to my surprise, doesn’t dismiss qualitative outright. This is a bit different from Hans Læssøe who explains how quantitative risk assessment is the only way to get unbiased insights and a range of impacts on not only risks, but also a range of odds on whether a particular goal or initiative will be successful.
The entire 40-minute conversation is worth taking the time to watch, but below the video are time stamps of important points in our discussion.
- Introduction and quick summary of Graeme’s quantitative background (0:00)
- Graeme’s somewhat surprising answer to the quantitative vs. qualitative debate (1:40).
- Clearing the air about operational vs. enterprise vs. strategic risk (7:45).
- If you absolutely have to use a heat map, at least begin with the end in mind (12:35).
- How a quantitative approach helps alleviate the drama of risk workshops (17:10).
- Both start from the same place, but quantitative provides a different way to capture information (20:00).
- Graeme’s simple, three question alternative to the heat map (26:45).
- How to make “non-math” people more comfortable with numbers (32:45).
- Concluding thoughts – the surprising reason why quantitative is hard (38:00).
This certainly isn’t the first time the subject of quantitative vs. qualitative assessment has been discussed. Below are some additional articles and my previous interview with Hans where you can learn more.
- Should Heat Maps Be Scrapped or Can They Still be Useful?
- Another Baby Step in the Qualitative to Quantitative Risk Assessment Journey
- Qualitative vs. Quantitative Risk Assessment – Can There Be a Middle Road?
- Is Quantitative the Only Future of Risk Management?
- Why Do Most Organizations Avoid Quantitative Risk Assessment?
- Quantitative Risk Analysis – What Company Must Have First
- My interview with Hans: Why Quantitative Risk Assessment is Not Just the Best But the Only Option – A Conversation
Thanks to Graeme for his time and insights, especially when you consider the time difference between Florida and his home in Denmark. We both hope you find our exchange helpful in understanding this complex, and controversial, subject.
Do you strictly favor one assessment method over the other or is there room for both?
Please feel free to share your thoughts below or join the conversation on LinkedIn.
And if your company is struggling to understand the proper way to use quantitative risk assessment or would otherwise like to better understand probabilities behind risks and opportunities, please reach out today to discuss your company’s current situation and goals.
