Introduction to Causal Risk Modeling

By Foresight Engineering · 2026-02-12 · 7 min read · Technical

Understanding how events trigger other events is key to realistic simulations. Learn the basics of causal chains in Foresight.

Beyond Correlation

Correlation does not imply causation, but in business modeling, causation is what matters. If X happens, does it cause Y?

Foresight uses a Causal Risk Model where you define:

  • Triggers: Events that start a chain reaction.
  • Logic Gates: Conditions that must be met (e.g., "Cash < $50k").
  • Effects: The downstream impact on cash flow or other variables.

    • Example: The Supply Shock

    Imagine a supply shock. It doesn't just increase COGS. It might:

  • Delay shipping (Revenue impact)
  • Increase marketing spend (to apologize/retain customers)
  • Trigger a penalty clause (Legal cost)

    • Modeling these as interconnected nodes allows for "Ripple Effect" analysis that spreadsheets simply cannot do.