Risk Analysis Video
Learn how to conduct effective Risk Analysis to identify and manage risk in your organization.
Almost every decision we make in business involves a risk of some kind.
Risk is made up of the likelihood of something going wrong, and the negative consequences if it does. Sometimes this is small. Other times, it’s large and the consequences can be serious.
This is why weighing up risk before you make a decision is so important. The better you understand it, the more prepared you are to manage it.
Carrying out a formal, four-step risk analysis is the best way to make sure your decisions are robust and well-considered.
First, you need to identify your threats. These could come from anywhere. For instance, what happens if your computer system fails, if a team member is sick, or if a key supplier lets you down? Make a note of these, and spend enough time identifying everything that might go wrong.
Once you have this list, you need to assess the value of each risk. To do this, estimate the probability of each event happening, and multiply this by what it would cost to set things right. This will give you a value for each risk.
Next, you need to manage significant risks, and there are several ways to do this. Ask yourself, "Can I do anything to eliminate them? What assets can I use to counter them?" And, "Can I come up with a contingency plan to minimize their effects?"
Once you've completed your risk analysis and worked out how you'll handle adverse events, you'll want to carry out frequent reviews. This could mean going over your risk analysis from time, to time to make sure that nothing has changed. Or you might want to test your systems and plans on a regular basis.
Carrying out a formal risk analysis when you have to make a big decision is useful, because it helps you analyze the threats you might be facing and come up with contingency plans to manage them.
You can find out more about risk analysis in the article that accompanies this video.