To create a risk analysis process, start by identifying risks and analysing threats. Update the assessment regularly for relevance. Use risk assessment forms and business impact analysis templates.
Identify workplace risks such as accidents and hazardous substances. Do a full risk analysis by estimating impacts and building models.
Visualise project risks, on a risk matrix and prioritize them for management. Address cost, schedule, performance, and operational risks in project management. Understanding risks is key to making good decisions through risk-benefit analysis.
By following a structured risk assessment process you can manage uncertainty and risk manager ensure your project succeeds.
Summary
- Define scope and objectives of the risk assessment.
- Identify and assess risks.
- Determine risk assessment criteria and methodology.
- Engage key stakeholders in the assessment.
- Document findings, recommendations and action plans.
What is Risk Management
Risk management is a process of identifying, evaluating and controlling risks to ensure a safe workplace.
Understanding what risk management means and why can help you prioritise safety better.
What is Risk Management
A multi step approach to business operations risk management involves using existing processes, identifying threats and taking proactive measures to reduce exposure.
This involves doing a full risk assessment to evaluate risks using various risk analysis methods, including quantitative and the qualitative analysis and risk analysis techniques.
Once risks are identified organisations can develop and implement risk mitigation strategies to reduce the likelihood and impact of those threats.
By managing risks proactively you can increase your organisation’s resilience and ability to adapt to the unexpected and protect your operations and assets.
Risk management is key to business continuity and sustainability in a world of uncertainty.
Why Risk Management is Important
Organisations benefit from risk management as a key tool to reduce the impact of surprises and ensure business continuity throughout the project lifecycle.
Risk management is key to decision making and business continuity. The importance and benefits of risk management can be summarised as:
- Better decision making by having a structured approach to identifying and addressing risks quickly.
- Protecting the project lifecycle by managing potential threats and uncertainty.
- Business continuity by reducing disruption and increasing resilience in the face of challenges.
Risk Assessment Basics
Risk Assessment Basics involves understanding what risk assessment means and what it’s not.
By understanding these basics you can navigate the process of identifying hazards, assessing risks and implementing controls.
Distinguishing between risk assessment and risk analysis is key to developing a robust risk management strategy.
What is Risk Assessment?
Identifying hazards and analysing their impact is the first part of risk assessment. The process involves assessing risks that could harm a business by analysing events, determining harm and recording findings. You need to update the assessment regularly to confirm it’s still relevant for future events.
Key steps in risk assessment are:
- Identifying hazards
- Determining harm
- Reviewing assessment
Risk Assessment vs Risk Analysis
When distinguishing between risk assessment and risk analysis you need to understand their different focus within the occupational safety and hazard evaluation domain. Risk assessment is part of risk analysis, focused on safety hazards.
Risk and qualitative risk analysis includes hazard identification but goes further to risk management and effective risk communication. Risk assessment is about identifying risks and their impact, risk analysis is about developing strategies to mitigate those risks and communicating them within the organisation.
You need to understand this difference to have a full risk assessment process that covers all aspects of risk and safety in the workplace.
Preparing for Risk Assessment
When preparing for a risk assessment use a Needs Assessment Template and a Business Impact Analysis Template.
These will help you identify hazards, risks obvious hazards and potential impact on the organisation.
Needs Assessment Template
Use a full Needs Assessment Template to prepare for the risk assessment process by identifying business, department and learning needs. Incorporate a risk assessment template to help in identifying and analyzing risks, assigning risk owners, and planning appropriate risk responses.
When using this template consider:
- Use a risk assessment form to record identified risks.
- Use a risk management plan template to manage quantifiable risk.
- Use a risk matrix template to score the risks against likelihood and impact scale.
Business Impact Analysis Template
To assess the impact of disruptions on business functions leaders can use the Business Impact Analysis Template to prioritise functions for recovery during an outage. This template is part of the risk assessment process to help you assess the impact of disruptions on your business.
By using the business impact analysis template leaders can prioritise which functions need attention and recovery efforts during an outage. It allows you to systematically evaluate how different disruptions could affect different business functions so you can plan and prepare ahead.
Through this tool you can understand the potential consequences of disruptions and take proactive action to mitigate risks and ensure business continuity for critical operations.
Identifying Hazards and Risks
Identifying potential hazards and risks that could affect the business involves considering things like work accidents, emergency situations, toxic chemicals, employee conflicts, financial stress, etc.
When doing a risk assessment in the workplace you need to thoroughly look at the environment for hazards to employees and the business. This will help you understand the risks and implement controls to mitigate those risks.
Some things to remember when identifying hazards and risks are:
- Regularly inspect the workplace for hazards
- Speak to employees to get their perspective on risks
- Review past incidents to identify common risks and prevent future ones
Risk Analysis
When doing a risk analysis the first step is to identify risks and uncertainties within the organisation.
Next estimating the potential impact and building the models is critical.
Analyse the results to make informed decisions and develop risk management strategies. A cost-benefit analysis involves comparing the benefits a company receives to the financial and non-financial expenses related to the benefits.
Identify Risks and Uncertainty
You need to thoroughly look at potential risks and uncertainties that could impact the business by their likelihood and impact.
When doing a risk analysis:
- Identify all risks that could affect operations.
- Score the likelihood of each risk.
- Score the impact of those risks on the business.
Estimate Impact and Build Model(s)
To estimate the impact of risks on the business and manage uncertainties you need to build models that quantify the outcomes. By building these models you can quantify the risks, do uncertainty analysis and score the impact.
These models will help with risk quantification and uncertainty quantification so you can score the potential risk impact. By integrating impact assessment and risk analysis models into the risk assessment process you can identify potential threats and vulnerabilities.
The models are used to score the risks and prioritise mitigation strategies. By using these tools you have a thorough approach to risk management and make informed decisions and proactive risk mitigation.
Analyse Results
Once you have done the risk analysis you need to compare the risk likelihood, financial impact, and model simulations to decide what to do. You need to analyse the results thoroughly.
- Score the financial impact accurately.
- Consider the risks will happen.
- Use model simulations to predict outcomes.
Quantitative Risk Analysis
Quantitative risk analysis is assigning numbers to risks using data and statistics to score the likelihood risk probability and impact of potential hazards.
This helps to prioritise risks based on the numbers, to make informed decisions on risk management.
What is Quantitative Risk Analysis and Its Applications
Using simulation or deterministic statistics quantitative risk analysis assigns numbers to risks, involves creating a risk model and then analyse through graphs and scenario testing. This method provides a structured way to evaluate risks and their impact, to make decisions.
- Better Decision Making: By scoring risks you can prioritise actions.
- Better Risk Communication: Numbers help to communicate risks to stakeholders.
- Comparison: Allows you to compare different risks by their numbers.
Quantitative risk analysis is a key tool in the risk assessment process, a structured way to understand and manage the risks present in many applications.
Risk Matrix
When creating a risk matrix you need to identify and prioritise risks.
Impact scale and scoring the risks are part of this process.
Identify and Prioritise Risks
Identify and prioritise risks means evaluating the potential hazards and scoring the likelihood and impact to determine where to focus in the risk assessment process.
To prioritise risks you can:
- Use a risk matrix: This will help you visualise the risks by their likelihood and impact.
- Identify hazards: Look at all potential risks and hazards in the workplace.
- Prioritise risks: Which risks have the highest likelihood and impact for proactive risk management.
Impact Scale and Risk Rating
Defining the impact scale and scoring the risks means evaluating the likelihood and impact of each risk to determine their score in the risk assessment process.
By defining the impact scale you can categorise risks by their consequences.
Scoring the risk combines historical data on the likelihood of the risk happening with the impact if it does. This allows you to prioritise risks.
Using a risk matrix gives you a visual representation of the identified risks so you can understand and address them accordingly.
The risk matrix allows you to allocate resources to the high priority risks first.
Visualise and Manage Risks
When managing risks use risk matrices to visualise and prioritise the potential hazards by their probability and impact.
Good governance, risk and compliance (GRC) management is key to identifying and addressing risks in a structured way.
Visualise Risks with Risk Matrices
Risk matrices are great tools to visualise and prioritise risks by their likelihood and impact.
When visualising risks with risk matrices:
- Identify risks: List all potential risks that could affect the organisation.
- Prioritise risks: Score the likelihood and impact of each risk to determine which to focus on first.
- Visualise risks: Use the risk matrix to create a visual representation of the risks so you can understand and prioritise them better.
Good Governance, Risk and Compliance (GRC) Management
To improve governance, risk and compliance (GRC) management you should use risk management tools and have strategies to mitigate the risks. By including risk management tools in the risk assessment process you can improve your governance and reduce the impact of the risks.
By having risk mitigation strategies in place you can address the vulnerabilities and improve your risk analysis. This proactive approach allows you to identify, assess and respond to risks before they happen, so you can strengthen your GRC management framework.
Types of Risks in Project Management
Project management has many types of risks that can affect different parts of a project. These include cost, schedule, performance and operational risk, risks as well as market, governance, strategic, legal and environmental risks.
Knowing these types of risks is key to risk assessment and management in project planning and execution.
Cost, Schedule, Performance, Operational Risks
In project management you will encounter cost, schedule, performance and operational risks that can affect the delivery of your projects.
Cost risks are when you go over budget, schedule risks are when you don’t plan well and get delayed.
Performance risks are when the project fails to meet the expected outcomes.
Operational risks are from implementation challenges and process issues like distribution and procurement that affect project efficiency and success.
You need to identify and address these risks to ensure the project is delivered within budget, on time and to the expected outcomes.
Market, Governance, Strategic, Legal, Environmental Risks
Market risks, governance risks, strategic risks, legal risks and environmental risks are important in the project risk management because of their impact on project outcomes and overall success.
Market risks include competition, commodity markets and foreign exchange fluctuations that can affect project performance.
Governance risks are about the ethical behaviour of top management and company reputation.
Strategic risks are threats to the project objectives and goals.
Legal risks are from not meeting legal obligations including local laws and statutory requirements.
Environmental risks are the external factors or hazards that affect the project.
Assessing and addressing these risks is key to minimising the risk exposure negative consequences and project success.
FAQs
What are the 5 parts of a risk assessment?
Identify hazards, assess, identify potential hazards and impact, evaluate risks, implement controls, review controls. Gathering information and using templates helps. Following a template guarantees you manage risks for a safe work environment.
How do you write a risk management procedure?
When writing a risk management procedure you should start by identifying hazards and potential impact. The document must list all risks and controls. Using lists and templates helps.
How are risk assessments written?
When writing risk assessments you gather hazard information, evaluate risks and decide on precautions. Clear lists, headings and tables helps the document. Using a template simplifies the process and ensures you don’t miss out any information.
How do you format a risk assessment?
When formatting a risk assessment you should break it into sections like hazard identification, risk evaluation, and control measures. Clear headings, subheadings, and a table of contents helps readability. Bullet points and tables help to present the information.
In summary, a risk assessment procedure is key to workplace safety and minimising hazards. By following a template and a structured approach you can identify, evaluate and address risks proactively.
This will not only create a safe work environment but also organisational resilience and preparedness. Having a risk assessment procedure in place is the first step to protecting individuals and organisations from harm.
Chris Ekai is a Risk Management expert with over 10 years of experience in the field. He has a Master’s(MSc) degree in Risk Management from University of Portsmouth and is a CPA and Finance professional. He currently works as a Content Manager at Risk Publishing, writing about Enterprise Risk Management, Business Continuity Management and Project Management.