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. Choice, flexibility and transparency clearly have important implications for the framework used to manage risk and the systems which put that framework into practice. In particular, these principles lie at the heart of open risk-management frameworks. Such frameworks offer choices in terms of data, risk measures and methodology.