What does the term "quantitative risk analysis" refer to?

The term "quantitative risk analysis" refers to a method that uses numerical values and statistical techniques to assess and analyze risks. This approach involves the collection of data and the application of mathematical models to evaluate the likelihood and impact of various risks in a quantifiable manner. By employing statistical methods, organizations can derive measurable insights into potential risk scenarios, enabling them to prioritize risks, allocate resources efficiently, and develop strategies for mitigation.

Quantitative risk analysis is characterized by its objective nature, as it relies on data and established algorithms instead of subjective judgments or qualitative assessments. This makes it a vital tool for decision-makers who need to make informed choices based on analyzed data rather than assumptions or personal opinions. In operational risk management, for instance, leveraging numerical data helps organizations understand the potential financial implications of various risks, facilitating more effective management strategies.

In the context of the other choices, qualitative assessments and ethical considerations are integral aspects of risk management, but they fall under different categories that do not utilize the numerical and statistical foundation central to quantitative analysis. Predictive techniques that rely on assumptions do not embody the rigorous data-driven approach characteristic of quantitative risk analysis, as they may not offer the precise calculations necessary for effective risk measurement.