Modelling complex risks with Bayesian Networks

This paper describes how to use Bayesian networks to assess individual risks methodically.

Neil Allan's Enterprise Risk Management presentation on 'Modelling Complex Risks with Bayesian Networks'
Neil Allan's Enterprise Risk Management presentation on 'Modelling Complex Risks with Bayesian Networks'

Who wrote this?

Mr Neil Allan, Fellow & Founder of Bristol University Systems Centre, Visiting lecturer Bath and Canterbury (NZ) Universities, on behalf of the ICE-Institute and Faculty of Actuaries Enterprise Risk Management (ERM) group.

When?

It was first published in August 2012.

Why?

This is to help organisations to define their appetite for risk and then assess individual risks in a rigourous manner.

The joint ICE-Institute and Faculty of Actuaries Enterprise Risk Management (ERM) group is a combined expert panel consisting of engineers and actuaries. It was established to stimulate discussion and act as a focal point for thought leadership on the debate surrounding contemporary risks at the strategic/supra-strategic level. Its outputs are intended to stimulate the consideration at high-level management of risks, uncertainties and opportunities, among other topics.

Who should read this?

Anyone who is interested in applying Bayesian thinking to real life risk scenarios and wants to look at some worked examples. Those in high-level management positions, who need to plan construction and built environment work, with many complicated factors. 

Content

Bayesian networks are used to model risk-related knowledge. It's a method for looking at risk which can integrate dependencies directly between trigger events, risk drivers, and consequences. Bayesian networks use a probabilistic graphical model that shows random variables and their dependencies. 

ICE & Faculty of Actuaries – ERM Series

This is part of a series of Enterprise Risk Management outputs from ICE and the Institute and Faculty of Actuaries.

For more information and questions, please contact management@ice.org.uk.

Download this document