What is the primary focus of scenario analysis in operational risk management?

The primary focus of scenario analysis in operational risk management is to explore potential risk scenarios. This approach enables organizations to identify, understand, and assess the various ways operational risks might manifest in their specific context. By generating hypothetical scenarios, organizations can analyze the likelihood and potential impact of different risk events on their operations. This forward-looking perspective helps in preparing for uncertainties and implementing measures to mitigate potential disruptions.

The other aspects mentioned, such as evaluating historical risk data, assessing compliance with regulations, and implementing financial controls, may play important roles in a comprehensive approach to managing operational risk but do not specifically capture the essence of scenario analysis. Evaluating historical data provides insights into past occurrences, compliance assessments deal with meeting regulatory requirements, and financial controls focus on managing the monetary aspects of risk. However, scenario analysis is distinct in its goal of proactively imagining and preparing for future risk possibilities.