Be prepared—this is the motto of the Scouts, an international youth social movement founded in the early 1900s. And with good reason. To be useful and helpful, you need to be prepared for potential risks and threats.
This is true in business as well, which is why the field of risk management is consistently growing. Whether it’s a distributed denial of service [DDoS] attack on your servers, a political conflict affecting your supply chain, a natural calamity destroying your property, or a startup launching a competitive product, every business is prone to myriad risks.
In this blog post, we explore an early and critical part of your risk management strategy: Risk assessment. We show you why you need risk assessments, how you can conduct them, and what tools help you get the job done.
How to Perform Risk Assessment: Tools & Techniques
Summarize this article for me pleaseUnderstanding Risk Assessment
Let’s start with the basics: What is a risk assessment?
Risk assessment is the strategic and periodic study to identify potential hazards for a business.
A good risk assessment addresses:
Nature: This part of the risk assessment report defines the risk. For example, you might define a risk as, “non-compliance with General Data Protection Regulation [GDPR] will incur penalties when the product is launched in the EU region.”
Reasons: This is a little more complex. Non-compliance with GDPR might be a result of not investing time or not prioritizing it. However, if you’re considering a risk like a natural disaster, the reasons are many and often out of your control. So, use this part with discretion.
Likelihood: What is the likelihood of the risk materializing and adverse events occuring? If you’re not compliant with GDPR, you don’t face risks until you interact with a ‘data subject’ in the EU, who could be a person, company, or even a visitor. This means that if your US-based customer uses your product while traveling to France, you run the risk of non-compliance.
Potential impact: In this part of the study, you measure what it would mean for you to incur said risk. For instance, non-compliance with GDPR can attract fines of up to 4% of global revenue or €20 million.
Risk vs. hazard
The words risk and hazard are often used interchangeably, but they have distinct meanings, especially in the context of safety and risk management.
A hazard is anything that has the potential to cause harm, injury, or damage. This includes physical objects, substances, or conditions threatening health and safety. You can’t measure hazards.
Risk refers to the likelihood or probability that a hazard will actually cause harm or adverse effects. It encompasses both the occurrence and the severity of potential harm. Risks can be quantified as high, medium, or low based on likelihood and severity.
Let’s understand the difference between the two with some examples. While conducting an environmental risk assessment, you might encounter the following hazards.
- Natural hazards like earthquakes, floods, hurricanes, landslides
- Biological hazards, including invasive species, epidemics and pandemics, toxic algal blooms
- Chemical hazards like oil spills, heavy metal pollution, pesticides
The corresponding risks will be:
- Risks to property and life
- Risks to the eco-system leading to loss of biodiversity
- Risks to food security, health, and economic impact from droughts, polluted cities, and increased environmental stress
In a workplace, some commonly seen hazards are:
- Safety hazards like wet floors, exposed wiring, or unguarded machinery
- Work conditions hazards, such as noise, light, and temperature
- Ergonomic hazards like poor workstations
Corresponding risks could be:
- Injury
- Illness
- A poor employee experience
- Attrition
- Loss of reputation for the business
The examples above demonstrate that there are various types of risks. Let’s understand the most common ones first.
Types of risk assessments
You can perform risk assessments in multiple dimensions. For example, based on the types of hazards, you can perform assessments for environmental risks, technology risks, financial risks, compliance risks, etc. You can also conduct generic or specific assessments—for instance, you can assess health and safety risks org-wide or in specific locations.
Across these dimensions, there are a few common types of risk assessments, such as:
Quantitative risk assessment: Measuring risks and potential impact using numerical data.
For example, you might determine you have a 30% chance of a data breach, which is likely to cause a loss of $1 million.
Qualitative risk assessment: Using subjective judgment and observations to categorize risks on a scale of low, medium, or high on severity and likelihood.
For example, a data center might be “high risk” due to its location in an earthquake zone.
Site-specific risk assessment: Evaluating the conditions of a particular location, such as a construction site or an oil rig. It can also be virtual sites like a data center or your cloud infrastructure.
Asset-based risk assessment: Identifying risks associated with specific assets like IT systems, equipment, vehicles, etc. Some service businesses also include people in their asset-based risk assessments.
Vulnerability-based risk assessment: Identifying weaknesses in systems and environments. This assessment is inward looking. For example, in the tech world, vulnerability assessments and penetration testing [VAPT] is common practice.
Threat-based risk assessment: Evaluating risks by examining conditions that give rise to them. This is outward looking. For example, a financial institution might assess risks related to fraud.
Dynamic risk assessment: Real-time ongoing assessments responding to immediate or changing situations.
For instance, emergency responders conduct a dynamic risk assessment during a fire to understand the potential for structural collapse.
While these are the common types, they are not mutually exclusive. For instance, you can perform an asset-specific quantitative assessment or dynamic, threat-based assessments, etc. Which one you use depends on when you’re conducting the assessment.
Risk assessment timelines
There are two points in time when organizations typically conduct assessments: Regular intervals or based on triggers.
Regular intervals
A financial risk identification is typically performed every year. An information security assessment might be performed every quarter. Depending on the business and the type of assessment, organizations decide the schedule.
Triggers
Sometimes, emerging hazards, risks, or business situations trigger the need for an assessment. This could be:
- Before performing a project evaluation, launching a product, or opening a new vertical
- Before changes in equipment, material, software, or leadership
- After a significant incident that has exposed a vulnerability
- In response to regulatory or legislative changes
With that foundation, let’s examine how to conduct a risk assessment.
Summarize this article for me pleaseKey Steps in Conducting a Risk Assessment
Risk assessments are one of the most critical aspects of any business operation. They help preempt bad outcomes. A good risk assessment can save money, reputation, and even human lives.
So, it is important to conduct thorough and effective risk assessments. Here’s a primer on how.
1. Setup the systems for your risk assessment
Before actually assessing anything, create your risk assessment project management framework.
Define the scope
What functions, locations, assets, and processes will you assess? What are the goals of your assessment? Do you need to explore project cost risks? What do you seek to identify/learn?
Identify requirements
What time, personnel, budgets, and assets will you need for the risk assessment? For instance, if you’re conducting a risk assessment on fraudulent loan applications, you might need data scientists that your company does not already have. Outline these requirements clearly.
Sign up stakeholders
Who will be involved, and to what degree? Designate roles and responsibilities to people. You will ideally need a risk manager, an assessment team leader, subject matter experts, and a business partner.
Study the rules and regulations
What regulatory framework do you need to work within? Are there specific rules you need to follow? Does the report have to be created and presented in a specific way to the regulatory body?
Set up your tools
A thorough process needs a number of milestones checklists, risk assessment templates, etc. A good governance, risk, and compliance, i.e.., GRC software, can dramatically simplify the assessment process while improving the accuracy and effectiveness of outcomes.
Choose a risk assessment project management tool like ClickUp to support you through the journey.
2. Identify hazards
Once you’re set-up, it’s time to evaluate the first aspect of your risk, i.e., hazard. Depending on the type of risk assessment, you might encounter various hazards.
For example, if you’re performing environmental risk assessments, you might consider biological hazards and natural disasters. If you’re assessing the risk of employee turnover, you might explore health and safety hazards such as workplace accidents, labor strikes, or psychosocial hazards like bullying/stress, etc.
For hazard identification, you can collect data from:
Observation
Conduct walkthroughs of the location/asset/process under assessment. Carefully observe every aspect and how it interacts with others.
Conversation
Speak to the team working on the ground. Understand their concerns and what they see as risks. [You might not agree with them, but it’s always good to listen].
Historical reports
Review incident reports, complaints, analyses, recommendations, etc., from the past. Study the historical data on accidents or incidents to identify the hazards that led to them.
Benchmarks
Consult safety data sheets and equipment manuals to gather details on potential risks.
The simplest way to make a note of everything you find during this stage of your assessment is to use a tool like ClickUp Docs. With real-time collaboration, large teams can consolidate all their notes in one place for review and analysis later.
You can also use any of the risk register templates available to streamline this process.
3. Evaluate the risks
Not every hazard is a risk. You might be handling toxic chemicals, but with adequate safety measures, you might not run the risk of an accident. So, the next step is risk evaluation—finding out if there is a risk arising from the hazards you’ve identified.
The ClickUp Risk Assessment Whiteboard Template is a great place to do this. Suitable for beginners, this template enables you to identify and assess risks methodically. In collaboration with a remote team, you can use this ClickUp Whiteboards template to brainstorm and ideate on your risks as well.
4. Measure likelihood and impact
An important part of the assessment process is to evaluate the likelihood and impact of identified risks.
- Likelihood: Probability of the risk occurring [High, Medium, Low]
- Impact: Where, who, and what will be impacted by the risk?
This is also the step where most organizations falter. Professors and risk experts write that “we tend to be overconfident about the accuracy of our forecasts and risk assessments and far too narrow in our assessment of the range of outcomes that may occur.”
To avoid this pitfall:
- Err on the side of caution: It is better to worry too much than too little when it comes to risks
- Be expansive: Analyzing the risk to understand how different groups will be exposed and how
- Preempt the surprises: There is no such thing as a pleasant surprise in risk management. Always be looking for where and when a surprise is likely to occur.
For example, if you have a malfunctioning refrigerator in your retail store, think beyond its impact on product wastage or repair costs. Consider how customers who buy products stored in that fridge might fall sick.
A framework like the ClickUp Risk Register Template helps organize all this information effectively.
With this template, you can document your risks, their probability of occurrence, mitigation plans, and control measures all in one place. You can also track status, assign ownership, and consolidate data for reviews later.
5. Document current processes
Unless it’s a newly emerging risk, most already have some sort of response mechanism in place. Document them thoroughly so it can be optimized with each subsequent assessment.
Include the following.
- Ownership: Define who is responsible for the risk and response
- Process: Outline the workflow upon identifying the risk, including actions, resources, deadlines, milestones, KPIs, and other responsibilities
- Dependencies: What are the interdependencies between tasks or teams?
- Control: What is the current risk mitigation or contingency plan?
6. Schedule the next assessment
Your workplace is dynamic. Your risk assessment process and document need to reflect this.
Schedule regular reviews
Make it half-yearly or annual, or even more frequent, depending on the type of organization. If you’re working in a rapidly evolving environment like cybersecurity, you might even want to consider ongoing automated risk assessments and alerts.
Bonus Read 📖: A primer on cybersecurity risk management framework
Engage employees
Those closest to the ground understand the risks most. Speak to them regularly and gather insights and feedback. In project management, this can be especially important as subject matter experts and risk managers might not see the intricacies of everyday activities.
Use ClickUp’s Project Management Risk Analysis Template to document findings from the execution team.
Stay informed
Risks emerging from external hazards are constantly evolving. Cybersecurity threats are becoming increasingly sophisticated. In response, laws are evolving. Stay ahead of these advancements by proactively seeking information.
A well-established risk assessment process will help you and your team plan for every potential uncertainty, including black swan events. Regardless of the area of impact, a robust risk management software can be helpful.
Summarize this article for me pleaseTools to Implement Risk Assessment Processes
Risk assessment is a research-based activity. The team that conducts the risk assessment would typically need the following.
- Documentation: The ability to note down observations, gaps, and other important points
- Templates: Frameworks, checklists, and risk assessment templates like a risk matrix to analyze findings
- Visual tools: Features to brainstorm or collaborate with remote teams to come to a common understanding
- Sharing and recording: The possibility of sharing the assessment report with all relevant stakeholders with appropriate access control
Most teams today use multiple tools to achieve this. They might use Google Docs for note-taking, spreadsheets for checklists, PDFs for sharing, etc. While this is popular, it’s also inefficient.
An all-in-one tool like ClickUp can be a game-changer for risk assessment teams. With ClickUp, you can conduct your assessment, document findings, perform analysis, and securely share your reports all in one place.
Consider the ClickUp Risk Analysis Whiteboard Template. Here, add your risks and categorize them based on probability and severity. Include sticky notes of any points of reference.
Link to documents, images, and other files directly from the whiteboard template. From there, assign ownership and set up tasks to implement your mitigation strategy too.
Summarize this article for me pleaseMinimize Your Risks with ClickUp
When risks are inevitable, the only possible solution is to be prepared. Risk assessments help with exactly that.
They help you consider the possibility of things going wrong and ensure you don’t overlook dangers. They shed light on every possibility, from carpal tunnels and backaches to radiation and oil spills.
Risk assessments ensure you prioritize and create a safer work environment for you and your employees. They also offer you a chance to make data-driven decisions about resource allocation, budgets, and investments in safety measures.
Don’t cut corners on an activity as critical as risk assessment. Choose a robust, comprehensive, and collaborative tool like ClickUp to conduct regular audits, improve internal processes, create your risk management plan, and strengthen your resilience.
ClickUp makes it easy to keep your risk assessments updated and relevant. Scout’s honor!
Sign up for free and get started on your risk assessment today!
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