Learn how you can conduct an accurate risk analysis to properly identify and manage the risks that your organization may possibly face.

1. Risk Analysis & Risk Management
How to Properly Evaluate & Manage Business Risks

2. LEARN HOW YOU CAN CONDUCT AN ACCURATE RISK
ANALYSIS TO PROPERLY IDENTIFY AND MANAGE THE RISKS THAT
YOUR ORGANIZATION MAY POSSIBLY FACE.
Whatever role you have in your company or organization, you will
very likely need to make certain decisions along the way
that carry an element of risk.
There are two aspects of risk:
The probability that something will go wrong
The adverse consequences in the event something goes wrong

3. Risks are hard to foresee, let
alone get prepared for and
somehow manage.
If you get hit with the
consequences you never
planned for, in time, money
and reputation, quite a bit
could be at stake.
It helps you pinpoint and
understand the kind of risks
that could affect you in your
role.
It also helps you
determine how to
manage these
potential risks, and
hopefully minimize
their impact on what
you have planned
for the future.
This is what makes good Risk
Analysis a vital tool when the
type of work you do is risky.

4. Risk Analysis is the
process by which you
identify and manage
any potential
problems that might
undermine your key
business projects and
plans.
To reasonably
undertake a Risk
Analysis, all possible things
that could threaten your
business must be identified,
and an estimate must be
made as to the likelihood that
these situations would
actually occur.
Doing a
proper Risk
Analysis is not easy, it
can be very complex since
you’ll need to have detailed
knowledge about security
protocols, project plans, marketing
forecasts, a lot of financial
data and other things of
relevance.
Once carried
out, it serves as an essential
tool in planning and when
used properly, something
that will save you a lot of
time, money and your good
name and
reputation.
What Does Risk Analysis Encompass?

5. When Risk Analysis Should be Used?
Risk analysis is very useful in many different situations:
When making the
decision to either move
forward or not with a
particular project.
When preparing for things like
a natural disaster, technology
or equipment failures, theft or
the sickness and absence of
key staff members.
In the planning stages of projects,
which helps you foresee and avoid or
neutralize any potential problems.
When preparing for things like a natural
disaster, technology or equipment
failures, theft or the sickness and
absence of key staff members.
During safety improvements involving
potential workplace risks.

6. How to Effectively Use Risk Analysis
Steps for conducting a Risk Analysis:

7. Identify Specific Threats1
The first thing that must be done in a
proper
Risk Analysis is to identify any existing and
potential threats you might be facing.

8. The sources of these threats can be any number of things:
Any type of situation that could harm staff,
technology or products, such as toxic chemicals,
falling boxes, and/or poor lighting, etc.
Technical
Structural
Reputational
Political
Project
Advances or changes in technology and/
or technical failure
Loss of employee or customer loyalty and/or
confidence, damage to reputation.
Changes in governmental policy, public opinion,
tax laws, or foreign influence.
Taking longer than planned on key tasks,
going over budget, problems with the product or
quality of service.
Financial
Human
Natural
Operational
Procedural
A failure in business, fluctuations in the stock price,
changes in interest rates or non-availability of
credit and/or other sources of funding.
The illness, injury, death or loss by another cause of
a key part of the team.
A serious disease, severe weather event, or
natural disaster.
An interruption in operations, disruption of supplies,
losing access to vital assets, and/or failures in
distribution network.
Embezzlement and or/fraud caused by failures in
accountability, controls and/or internal systems

9. A variety of approaches can be used to carry out
a thorough and complete analysis:
Review the list above to determine if any of these
possible threats pertain to your business.
Run through the various processes, systems and/or structures used in your business and
evaluate the potential risks of any aspect of these. Do you see any
vulnerability?
Speak to others who may have a different perspective. If you lead the team, get input
from team members, and consult with others who work in the organization, or with
people who have managed similar projects.

10. Use available tools like a Failure Mode & Effects Analysis,
a SWOT Analysis that can help you in uncovering possible
threats. A Scenario Analysis can help you explore
potential future threats.

11. Estimate Your Level of Risk
2 Once you’ve pinpointed and identified any threats you
may be facing, you must evaluate both the chances of
these threats actually happening and the possible
impact they would have on your business.
One way to do this is to make a best estimate in terms
of probability of this particular event happening, and
then multiply this probability by the amount of money
it could cost you to make things right in the event it
actually occurred. The result is a value attached to
this particular risk:
Probability of Event X Cost to Repair = Risk Value

12. For example, perhaps you’ve identified a risk and it has to do with the possibility your rent
may be substantially increased. Your thought is that there may be an 80% of this actually
happening in the next year. You’ve determined this because you know your landlord has
increased the rests for other businesses in the complex. If this does come about, it would cost
an additional $500,000 over the course of the next year.
The Risk Value of having a rent increase would be:
Probability of Event of 0.80 X Cost of Event of $500.000 = Risk Value of $400,000

13. A Risk Impact/Probability Chart can be used to assess your risk. This
helps to identify exactly which risks you should be focusing on. Take
your time and do not rush through this step. Collect as much
information as possible so that you are accurately estimating the
probability of a particular event actually happening as well as the
costs associated with setting things right and repairing the damage
.Past data can be used to guide you if you have no other way to
accurately forecast things.
low risk
Minimum
risk
Moderate
risk
low risk
low risk
low risk
High
risk
low risk
low risk
Minimum
risk
Minimum
risk
Minimum
risk
Minimum
risk
Moderate
risk
Moderate
risk
Moderate
risk
Moderate
risk
High
risk
High
risk
Extreme
risk
Extreme
risk
Extreme
risk
Negligibile Minor Moderate Significant Severe
High
risk
High
risk
High
risk

14. How to Best Manage the Risk
Once you've estimated the value of the potential risks you face, you
can begin considering ways to manage these.
It only makes sense to find approaches that are cost-effective. You
do not want to spend more to eliminate a possible risk than it
would cost you if the event actually occurred.
It might make more sense to live with the risk than to go to great
lengths, spending way too much to eliminate it.
However, you do not want to compromise where personal safety or
ethics are concerned. These risks do need to be addressed.

15. Avoid the Potential Risk
• In some instances, it makes more sense to avoid the potential risk. This may mean not being involved in a new business venture,
turning a project down, and/or just skipping a risky activity.
• These are viable and good options when there is no advantage in assuming the risk, or when the potential costs of dealing with the
effects are simply too much.
• However you need to understand that in avoiding a possible risk, there is a chance of missing out on a good opportunity.
• You may want to do a What If Analysis, exploring your options while making the decision.

16. Share Your Risk with Others
Another option is to share the risk, as well as any potential gain, with others.
These could be individuals, teams, another company or
organization or even third parties.
For example, you already share the risk when you buy insurance
for your office building and inventory with an insurance company
(a third party), or when you take on a partner in a joint initiative to
develop a product.

17. Decide to Accept the Risk
You always reserve the option to accept this risk. This may be all you can do
when you cannot mitigate or prevent the risk, when any possible loss turns out to
be less than it would cost to insure against the risk, or when any possible gain is
worth taking the risk.
• For example, you might decide to accept the risk of launching a
project late as long as the possible sales will cover the costs.
• Prior to deciding to accept a risk, do an Impact Analysis to look at
all the possible consequences of accepting the risk.
• There may be nothing you can do about the risk, but it may be
smart to decide on a contingency plan to deal with any
consequences.

18. Controlling a Particular Risk
If you decide to accept a particular risk, there are several ways that you can diminish its impact.
Conducting Business Experiments can be a good way to evaluate and reduce a risk. You would roll out whatever high-risk
activity you are contemplating, but on a very small scale and in a manner that you can control. Experiments can be used to see where problems happen,
discovering ways to detect and prevent risks prior to introducing this activity on a substantially larger scale.
• Detecting risks involves pinpointing the stages in a process when something could take a wrong turn, and putting specific steps in place to promptly
rectify the problems should they happen. Detecting includes double-checking all financial reports, doing safety testing before the release of a product,
and/or installing some type of sensors to find defects in products.
• Preventing risks means striving to prevent a particular high-risk circumstance from occurring. This involves conducting training on health and safety,
protecting corporate servers with firewalls, and totally cross-training team members.
• Plan Do Check Act can be utilized to control the impact a risky situation has on the company or organization.
It is similar to conducting a Business Experiment since it has to do with testing the various ways you can diminish a risk.
This particular tool provides four phases that guide you through a complete analysis of the whole situation, the creation of and testing of a certain possible
solution, seeing how well it worked, and if successful, incorporating the solution.

19. Main Points
• Risk Analysis has been proven to be effective in identifying and assessing things that could potentially have an adverse
effect on the success of a project or business.
• It helps you examine the real or potential risks that you or your company or organization are faced with. It helps you determine whether to move
forward on something or not.
• You conduct a Risk Analysis to identify potential threats and estimate the possibility of them happening.
• Once you’ve determined the value of your potential risks, you can begin to look at ways to effectively manage them.
• You may decide to avoid the risk altogether, share it with others, or accept the risk and take steps to reduce the impact it could have.
• It is critically important that you are thorough when conducting your Risk Analysis, and look at all the potential impacts they could have if the risks
actually happened.
• You must be mindful of the costs involved, all the ethical considerations and everyone’s personal safety.