Risk Assessment Steps
Risk management is the identification, evaluation, and prioritization of risks or uncertainties.
It is followed up by risk assessment steps that include reducing, observing.
And regulating the impact of risk realities or enhancing the opportunity potential by applying coordinated & economic risk management strategies.
There are different risks in business that include financial, security & fraud, operational, compliance, reputation and competition risks.
Risk assessment is vital when you are looking out for all these risks.
It sets foresight for returns on investments and projects all potential hostile responses a company could face by starting a new venture.
An example of risk assessment is a COSHH risk assessment that focuses on the hazards and risks in your workplace.
Some processes used in business can produce harmful substances, for example, silica dust from tile cutting.
Working at heights in construction is an example of compliance risk, which requires a quantitative risk assessment to assess employee exposure to risk and implement the necessary mitigation plan.
Before deciding the effective risk management process for your state of affairs, there are five risk assessment steps to take first to assess the risk and find the best solution.
Risk Assessment Steps
Identifying the risk
Risk identification begins by looking for the internal and external sources of risk.
Every stakeholder should express all things that can go wrong to improve acceptance of an initiative.
Some companies check databases of issues that occurred with similar programs, strategies, or projects when identifying risk.
Analyzing the risk
Once you have identified and listed potential risks, comprehensively carry out a risk analysis to know the effect that each risk will have on consumer behavior. The overall organizational performance, and other current projects.
Evaluating the risk
Risk evaluation is a fundamental business practice that should apply to investments, strategies, commercial agreements, programs, projects, and the operations.
Risk evaluation helps to provide a clear picture of the seriousness of the risk plus qualitative and/or quantitative relationships between benefits and associated risks.
Treating the risk
Since you know the risk likely to occur, their chances of occurrence, and severity.
Find the options and choices available to handle the risks to lessen the probability of risk or increase the chances of a positive outcome.
Monitoring the risk
As you identify changes and track the sequence of outcomes, steadily treat every rising problem to avoid ripple effects that may trigger a greater risk.
The next crucial wave of risk assessment is risk management. There are several ways to managing risk, and they all depend on the risk and the risk effects or opportunities.
Best Strategies for Managing Risk:
In the best-case scenario, you can avoid the effects of risk altogether. But in avoiding all situations that carry risk, you also lose all associated potential benefits and opportunities.
Implement minor changes to reduce the frequency or severity of losses.
For example, investors diversify their portfolio and invests in various sectors of the market that tend to move in the opposite direction from their major investment.
Risk-sharing or risk-spreading reallocates the liability of loss or gain over multiple parties.
These parties could include company members, an outsourced entity, or an insurance policy.
Risk-retention involves acceptance of losses by deliberately deciding not to purchase an insurance policy and pay for the loss.
This option is best for minor risks where loss recovery is easy.
For example, a company may instead set aside funds for the eventual replacement of the warehouse damaged roof rather than purchase an insurance policy.
If you are looking for guidance through your company’s risk management process?
ECGB has the solutions and expertise you need to identify and assess risks and to apply the best solution or strategy.