Which of the following is an example of a quantitative risk analysis technique?

Prepare for the IBAM Module 3 Test with accurate questions, comprehensive flashcards, detailed explanations, and insightful hints to ensure exam success.

The selected answer is a Monte Carlo simulation, which is indeed a quantitative risk analysis technique. This method involves using computer algorithms to simulate a model's behavior under varied conditions, allowing analysts to assess the likelihood of different outcomes based on random sampling. By computing a large number of iterations, the simulation produces a distribution of possible risks and potential impacts, enabling decision-makers to understand the probabilities associated with various risks and their financial implications.

In contrast, the other options do not focus on quantifying risk. SWOT analysis evaluates strengths, weaknesses, opportunities, and threats from a strategic perspective but doesn't provide numerical data. The Fishbone diagram is a visual tool used for identifying root causes of problems without numerical assessment. Lastly, PESTLE analysis examines external factors (Political, Economic, Social, Technological, Legal, and Environmental) affecting an organization, which is more qualitative in nature and does not quantify risk. Thus, Monte Carlo simulation stands out as a distinct approach to quantitatively analyze risk.

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