Vauriorisk

Vaeuriorisk is a quantitative metric used in risk management to estimate the expected damage from a set of adverse events, by combining the likelihood of each event with its potential loss. It generalizes the concept of expected loss by emphasizing damage magnitude rather than probability alone.

The term blends “damage” and “risk” and is not tied to a single regulatory standard; definitions vary by sector. In most uses, vauriorisk is expressed in monetary terms or in units of impact, such as operational downtime or customer disruption.

Calculation of vauriorisk typically involves summing the probability of each modeled outcome multiplied by its associated damage. Common methods include Monte Carlo simulation, scenario analysis, and Bayesian updating. The metric can be estimated for a specific time horizon and can aggregate risks across different domains.

Applications of vauriorisk span finance, operations, and technology. In finance, it supports capital allocation by highlighting exposure to high-damage events; in operations and supply chain management, it helps prioritize mitigations; in cybersecurity and safety engineering, it informs resilience investments. It is often used alongside probability-focused measures such as risk probability, exposure, and traditional loss metrics.

Limitations and criticisms include dependence on the quality of damage estimates and the modeling of tail events, dependencies, and correlations among risks. Vauriorisk can understate extreme losses if the models are misspecified or if rare but impactful scenarios are not adequately captured.

See also: risk assessment, expected loss, scenario analysis, Monte Carlo simulation.