Uncertainty Reduction in Operational Risk Management Process

Guy Burstein () and Inon Zuckerman
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Guy Burstein: Department of Industrial Engineering & Management, Ariel University, Ariel 40700, Israel
Inon Zuckerman: Department of Industrial Engineering & Management, Ariel University, Ariel 40700, Israel

Risks, 2024, vol. 12, issue 5, 1-12

Abstract: This paper proposes a new framework to reduce the variance and uncertainty in the risk assessment process. Today, this process is susceptible to background noise from sources of human factor biases and erroneous measurements. Our new framework consists of deconstructing the likelihood of failure function into its sub-factor and then reconstructing it in a formula that can reduce the variance and biases of a human auditor judgment. We tested our new framework on both a questionnaire study and a simulation of the risk assessment process, and the improvement in reducing the variance is significant.

Keywords: operational risk; risk management; risk factors; risk assessment; uncertainty reduction (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:12:y:2024:i:5:p:77-:d:1392610

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