The Financial Services Authority has published a paper explaining changes to its Arrow risk framework as part of its programme of making it easier to do business with.
The paper explains the Arrow risk model as risk equals the impact of the problem if it occurs multiplied by the probability of the problem occurring. Using this equation, firms are rated as either low, medium low, medium high or high, and the rating determines the FSA’s overall approach and the intensity of its response. It calculates the impact and probability associated with the firm as a whole and it assess the risk associated with issues relating to the firm or theme. Impact is measured through quantitative information about the scope and severity of the potential problem and th...
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