Estimate a loss scenario without fake precision
Draft a quantified loss scenario using frequency, magnitude, and uncertainty ranges.
Finance must decide whether a $400,000 payment-fraud control upgrade is justified, but the risk is currently rated only as high. Quantified scenario: loss event -> event frequency range -> loss magnitude range -> treatment effect -> decision comparison. The common trap is asking for a single exact loss number. That creates fake precision and hides the uncertainty that leaders need to see. Step 1 Define the loss event: unauthorized payment released and not recovered within 10 business days. A precise event keeps the estimate from mixing near misses, recovered errors, and actual losses. Step 2 Estimate frequency: 6 to 14…
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