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A risk is an event that may happen while an Issue is a risk that has happened. Both must be addressed.

Table of Contents

How to Analyse Risk​

The benefit of risk analysis appears when the risk becomes an issue. Instead of running around madly trying to determine a solution for a dozen “hair on fire” things simultaneously, you have already determined the actions required and the people to do them. Just follow the list of steps and all will be well.

Rank Your Risks

I prefer to identify risks then assign a number between one and nine for both likelihood and severity. When these numbers are multiplied, a score is created defining their urgency. Sort them by urgency and you have a prioritised list.

Brainstorm the Risks and Strategies

Gather a relevant team then brainstorm the risks and the mitigation strategies.

It is not as difficult as it appears. When both likelihood and severity have high scores, the urgency shows a high priority. Plan these first.

When a risk occurs, it is much easier to reach for the folder with all of the answers.

The Mitigation Strategy

The mitigation strategy must contain both the step by step solution of what is to be done and the list of people to do them. This would be:

  • what to do
  • who to do it
  • in what order
  • who to report progress to

Types of Risk​

The list below will assist you to prepare.

  • Physical risk
  • Economic risk
  • Commercial risk
  • Reputation risk
  • Weather risk
  • Environmental risk
  • Safety risk
  • Litigation risk
  • Intellectual property risk

Physical Risk

This is a risk involving damage to people and equipment. It can have long lasting implications and reduce your business – thankfully damage to equipment is usually covered by insurance. Damage to people may also be covered, but is a major nuisance.

Overall, insurance payouts never cover the full cost of any event.

Economic Risk

Economic risk derives from changed trade and economic parameters. Classic examples are recession, depression or trade war. Currency value changes can also cause broad upset.

Commercial Risk

Be on the lookout for failure of suppliers or customers – this can also have a long term impact beyond simply having someone not pay their bills.

Reputation Risk

Your business reputation is possibly one of a companies greatest assets. It determines who will deal with you and to what extent. You do not want people to feel that they must count their fingers after shaking hands with you!

Social media is all pervasive and internet copy is for ever!

Weather Risk

Weather can be very destructive. Storms, fire, floods, strong wind, drought etc may be covered by insurance, but you never seem to recover the full value of the damage as there are often many intangibles and lost profit due to poor subsequent production.

Environmental Risk

Environmental risk involves damage to the landscape and pollution. The implications of this can be quite far reaching..

Safety Risk

Safety Risk generally refers to injury or damage to people. This may be physical or chemical. Keep a close eye on the risks and Work Health and Safety standards,

Litigation Risk

Litigation risk is two sided. It is just as much of a nuisance being sued as needing to resort to litigation to get a fair outcome. It costs money and resources win, lose or draw.

Intellectual Property Risk

Intellectual Property (IP) is an important asset to a business. IP risk is usually related to patents and trademarks but lack of information security can be quite damaging to a business. It is often closely related to your reputation.

Disaster Recovery Plan

Ensure that your mitigation strategy takes the form of a Disaster Recovery Plan.

Each step must be initialled with date and time by the relevant person. This is necessary as sometimes an incident can go legal – particularly if someone is hurt or the cost of damage is high.

What to Include

Include:

  • a contact list
  • a comprehensive action list
  • the locations of needed equipment and reference
 

Do not forget to include your insurance, suppliers and customers in the notification list – they will be very appreciative as they are definitely affected and timely notice will trigger their action list.

In most circumstances, the insurer must be informed quickly so they can get an assessor on-site. This will start the ball rolling quicker with less angst.

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