3 Aspects of Risk Assessment

3 Aspects of Risk Assessment

One of the most important aspects of business operations is risk. Large or small, multi-million dollar, or microscopic budgets, every activity involves some degree of risk. Enormous implications are connected to some business processes and activities. The decision-making required for those activities needs to be informed by some degree of risk analysis.

Risk assessment and the measures to off-set potential risks are vital elements of operations. They act as counterweights against the upside reward calculations. Important safety services are a necessary piece of the puzzle that guard against potentially catastrophic consequences. Creating a comprehensive picture of risks requires thinking outside of conventional circumstances. Consideration of “what if” scenarios, assessing worst-case outcomes and a degree of skeptical evaluation are three components of risk assessment.

Considering What-if Outcomes

New projects or changes to established operating procedures benefit most from this type of analysis. Meticulously walking through each step of the project or procedure and frequently pausing to reflect on unanticipated outcomes is the goal. Points at which employees provide inputs or make changes are particularly vulnerable to errors or overlooked actions. What happens if an employee forgets to close a valve or save changes to a database? These are the kinds of questions to ask.

Assessing Worst-Case Scenarios

Evaluating the ultimate risk of a process includes worst-case scenarios. If there is a catastrophic failure, whether man-made or natural disaster, knowing the maximum potential damage helps to determine what measures are required to offset that risk.  Insurance levels, additional redundancies and more explicit safety measures may be part of the answer.

Evaluating Skeptically

Businesspeople want to succeed in every aspect of their jobs. Unfortunately, that isn’t what always happens. The temptation to view projects or processes through overly optimistic lenses is very real and common. Revenues are exaggerated, competition is downplayed, and the result is a skewed picture of reality. Risks are overlooked or, worse still, ignored. Here, questioning every assumption and independently auditing process plans can help correct the distortions of reality.

Understanding the risks associated with business activities is crucial for sound operations. Accurately evaluating potential downsides and planning for failures is a necessary exercise. Appropriate measures can then be put in place to prepare for the event of risks becoming realities.

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