Bow-Tie Analysis is often presented as a panacea for the analysis of risk. On the one hand, they are intuitive, provide a useful structure for the discussion of risk, control and mitigation and they provide a natural bridge between qualitative and quantitative assessment methodologies. At the same time, however, they are illogical, prohibitively restrictive in what they can model, and potentially value-eroding.
In this talk, I will present bow-tie analysis and the natural way in which it supports the quantitative analysis of event-based loss risks. I will discuss their categorical shortcomings and the modelling challenges they represent; and I will suggest an interpretation that resolves many of these challenges, while maintaining much of their apparent intuitive appeal.
Graeme is an advisor in the application of quantitative methods to risk management and strategy and an expert in uncertainty quantification. He has senior management experience as both head of strategy and head of risk in multi-national companies and more than 20 years’ experience applying mathematical modelling to business and policy decisions. Graeme holds a PhD in Applied Mathematics from the University of Cambridge and teaches at Copenhagen University. He is a fellow of the UK Institute of Mathematics and its Applications and a chartered mathematician, as well as a popular writer on risk quantification and a sought-after speaker.