Risk Assessment
Risk assessment is the process of looking at both the totality and minutiae of one's organization, its processes, operations, technology, strategy and people, and identifying the potential for risks and the impacts of those risks. Risks may emerge everywhere from uncertainty in financial markets to the failure of a project to a legal liability or a natural disaster or a kink in the supply chain. Once risks are identified, their fall out is projected and a strategy is developed in order to prevent, minimize, monitor, control and establish a plan B in the event of disaster.
Risk assessment is often three-fold:
- Hazard identification: The process of identifying risk factors that could harm the business.
- Risk Evaluation and Analysis: Evaluating the probability and scale of the risk.
- Risk Control: Creating a plan for ways to control or eliminate risk. This prevents it from occurring and acts a contingency in case the worst case scenario comes to fruition.
Risk assessment should be completed in a few scenarios:
- before new business opportunities are introduced
- as changes to activities occur, as conditions change
- when risks are identified
- periodically to ensure new risks don’t emerge
Risk assessment is important because it can prevent harm to organizations as well as legal, PR and financial fallout. It also determines whether internal controls are adequate and prioritizes hazards.