What is risk assessment?
A risk assessment can be quantitative or qualitative. For quantitative analysis, explicit values are assigned to the probability of a risk occurring, and impact is often measured in financial terms. Qualitative risk assessments do not use numbers, and their main aim is to identify those risks are perceived to pose the most danger.
Why do a risk assessment?
Risks assessments provide an opportunity to identify and understand hazards, vulnerabilities, and threats that could impact negatively on the business. Using this information, an organization can then prioritize expenditure and effort on risk mitigation and control strategies. Risk assessments are an opportunity for your whole team to participate in identifying key risks and obtain a mutual understanding of critical issues that might impact on your success.
Who should complete a risk assessment?
Because the technique is so simple and versatile, development of a Risk Map is useful for:
- All industries
- All levels of an organization
- All departments
- Existing or new businesses
- Business processes
Use risk mapping:
- As part of regular organizational reviews
- To proactively assess changing business conditions
- To explore new initiatives
- To focus and redirect efforts and resources
- As part of emergency, crisis and business continuity planning
- As a broad environmental scan for initial planning
The risk assessment template
How to run a risk assessment activity
Give context and identify the scope of the risk assessment
Gather input and ideas on the risks to the business
Position risks according to their perceived likelihood and impact
Vote to identify which ones people think are the most urgent priorities for action
Develop risk mitigation strategies and assign responsibilities and timeframes
Report on the outcomes and monitor as part of your risk management strategy
Give context and define the scope of the risk assessment. The goals of a risk assessment will depend on the industry, organization, and business processes under examination. Participants in the session should have expert knowledge of the area under examination or be provided with enough information to allow them to contribute effectively.
Present any data and information that will help give context for the session. Examples of information might include:
- Results from a business impact assessment, Business Model Canvas, SWOT analysis, PESTLE analysis
- Data from the organization’s quality management and other information systems
- Industry trends and news
- Relevant rules and regulations
Define whether the session is addressing strategic, project, process, systems, product or service risks. By making the scope of the meeting clear, participants can focus their efforts, eg:
- Organizational risks over the next five years
- Risks associated with the development of a new product or service.
- Health & Safety risks for employees involved in a particular manufacturing process.
- Risks to confidential data and information systems.
It is also useful to define criteria for Likelihood and Impact axis in the matrix. Depending on the scope of the session, these definitions are likely to be quite different from one risk analysis to another.
- A high likelihood could mean the risk is almost certain to occur, medium – perhaps once every couple of years, and low is a once in a decade occurrence.
- A high impact might mean the business ceases to function for a period of time or there are multiple fatalities. A low impact could mean minor injuries and a delay in deliveries for a few days.
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