This chapter explains different aspects of dynamic financial analysis (DFA), which is a well‐established, practical modeling approach, which lends itself to the investigation of operational risk. It is widely used within the actuarial profession and the insurance sector. DFA seeks to model the reactions of an organization in response to a large number of interrelated risk factors, with a view to analyzing the impact of alternative decisions on an organization's bottom line. From an operational risk perspective, the aim is to explore a range of possible outcomes using stochastic simulation techniques, with a view to evaluating alternative mitigation and control proposals, and thus prioritize actions. A DFA model can take into account loss event distributions together with the associated costs, cash flow implications, and capital requirements. DFA enables an enterprise‐wide overview to be taken, thus facilitating more informed decisions.