This may seem to be a technical topic, but it is also very important once you elevate your focus from the analysis of individual Risk Events to a Portfolio of Risks. If you are or want to be at an executive level being responsible for a portfolio of Risks, such as a CISO for cybersecurity, CRO for Enterprise Risk Management areas, Board or CEO, it is important to understand how the risk within the portfolio is calculated.

You will learn in this video about the difference of analyzing individual Risks with Monte-Carlo Simulation and picking their worst case instance versus simulating the entire portfolio and taking the worst case instance for the portfolio.

In Risk Quantification, having a portfolio of risks provides a benefit that it is very unlikely that every risk area would have the worst case at the same time. However, if you want to stress test your portfolio to understand the real worst case, than this portfolio benefit may result in an underestimation of the risk within the portfolio.