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What
is the Risk? What are the methods of Risk analysis?
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Posted:
Oct
2008 |
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Entrepreneurship
is defined as set of different activities that
consist the business development. These activities
are starting with idea, project development,
evaluation, investment, development, start-up,
expansion, harvesting, re-evaluation and cycle
improvement. All these activities are important
for sustainable development of the business. |
But
during this step-by-step business process, there are many
situations where the whole process can be jeopardized by
incidents that may have more or less influence. The whole
process is planned in the best manner. But regardless how
perfect the execution plan is, there is a certain
possibility that some occurrences will deviate plan from
it's path until a certain extent. The possibility of
incident occurrences that will deviate execution of the
plan is defined as a Risk.
The
Risk is the part of every business. There is always a
chance that something will happen that will change the
development of plan. Since the Risk is inevitable
companion of the business, it is necessary to provide Risk
Analysis and Risks management, in order to prevent negative occurrences and to
alleviate consequences, if they appear.
The
Risk analysis and management of the Risk is not tangible as
other business indicators, therefore it cannot be
calculated precisely. In order to expect the unexpected,
it is necessary to use subjective judgment in conjunction
with structured analytical tools. During the Risk analysis
three main area are in the scope of the Risk Analysis
Tool:
- Occurrence
– This Risk analysis indicator expresses possibility of Risk
to happen. Higher the possibility, the higher is
the rating.
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- Impact
– This Risk analysis indicator Shows how big impact the Incident will
create in case that happens.
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- Detection
– Failure to detect the incident before
happening is increasing the Risk. This risk
analysis indicator
shows detectability failure. More chance of
detection failure means higher grade of the
Risk.
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These
three factors of Risk analysis are rated from 1-10. The
Total Risk assessment is expressed as a multiplication
score of Risk factors:
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Risk
= Occurrence x Impact x Detection |
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This
is the analytical tool for a Risk assessment. This tool
should be used systematically in a Risk analysis process. But how should we expect the unexpected in a
relevant manner?
The
recommended flow of Risk assessment process is:
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1.)
Start Risk assessment process before Business
Planning.
2.)
Organize workshop of Risk Analysis with mid and top level managers of
different functions.
3.)
Train participants about structure of the Risk
universe. Brainstorm possible Risks of the business.
Write down all potential risks.
4.)
Rate all risks according the Risk Analysis Tool.
Every participant of the workshop should vote from
1-10 for Occurrence, Impact and Detectability for
every identified Risk.
5.)
After compiling of all data create Risk Analysis
Report. Based on this report, prepare plan of
preventive and corrective measures, according the
importance ranking of every risk.
6.)
Start next Risk assessment workshop with
re-evaluation last Risk Analysis Report.
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This
approach is giving you the chance to anticipate potential
Risks and to be prepared for the situation of incident
occurrence. It is true that Risk analysis is still the
game of expecting of unexpected, but with this model you
will be better prepared and less vulnerable for the
potential incidence occurrences.
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Risk Analysis ToolThe
Risk Analysis Tool should be used during
Risk Assessment Process. The Tool is
composed from three parts:
- Risk Analysis - Tool
for Assessing the Risk
- Action Plan -
Preventive and Corrective Action Plan Based
on Risk Analysis
- Risk Universe - the
list of the most common Risks
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| DOWNLOAD |
Created:
Oct 2008 |
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