The Previous Quarter’s Risk Environment
The moderate loss frequency and severity distributions associated with this quarter did not provide a clearly identifiable risk management strategy, according to the Risk Management Technique Decision Matrix; the distributions place the nature of the risky environment near the center of the Matrix. Thus, a number of differing risk management strategies might have been appropriate – there is no standard theoretical solution for this risk environment.
The graph to the right describes the range of likely aggregate losses your corporation can expect this coming quarter. There is a 70 percent chance that aggregate losses will be less than $1,000. However, there is a 20 percent chance that aggregate losses will exceed $10,000, possibly even as high as $40,000.