Distributions

*/By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc./*

*/Follow us on Twitter/* [1]

Distributions play a central role in risk management.  We look at
distributions to calculate Value at Risk, Credit Risk, Foreign Exchange Risk,
Cash Flow Risk etcetera, etcetera, etcetera.  It is all part of the
increasing quantification and measurement of risk and risk exposures. 
However what we sometimes forget (perhaps conveniently) is that most of the
really important risks such as Strategic Risk, Reputational Risk, Paradigm
Shifting Risk, Cyber Risk or Catastrophic Risk do not have convenient
distributions.  The wise risk manager respects distributions but also
respects the limits of distributions – especially where they do not apply.


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