Different users have different risk-management needs. Even within a single organisation, the needs of, say, the treasury function are not the same as those of a risk-taking business unit. Users must choose the appropriate data, methods and tools in each case to make the risk analysis relevant and appropriate. This choice always involves a trade-off between completeness and simplicity. The more complete a risk analysis is, the more complex it becomes.
Complexity is the price paid for increased sophistication, thoroughness and accuracy.
This means sacrificing simplicity, speed and, to some extent, transparency. Whether you are trying to understand the risks in a complex portfolio, compare alternative strategies, or restructure the exposure profile of a business, flexibility plays an important role in getting the right answers quickly. Flexibility means using an array of tools to explore risk in different ways. In any risk analysis it is essential that the data and methods are transparent, well- documented, and their limitations understood. The whole framework for looking at risk and the systems used to measure and analyse it must be open and easily understood.