Risk Identification in Risk Management
When the context is fruitfully established, the next step to take is identifying the potential risks involved. Identifying can be done at the source level or at the level of the problem itself.
Source analysis means analyzing the source of the risks involved and the proper measures required for mitigation being kept in its place. The source of this risk can be both internal as well as external to the system requirement. Some instances of the source of the risk can be either by employees or operational ineptitude for a specific process etc.
Alternatively, problem analysis gives more emphasis to analyzing the effect of the risk instead of the cause. For instance, a decrease in production, risk of losing/misplacing money etc.
The method of selection differs in the industry, culture of the organization and various other reasons. On the other hand, a few common procedures of risk identification are as follows:
- Taxonomy based Risk Identification: Taxonomy occurs because of the breakdown of the possibility of the risk sources. A questionnaire is planned depending on the present knowledge and its answers are the risks.
- Objective based Risk Identification: Any business activity or organization has some specific goals or objective/s. Risk is perceived as an activity which is considered as an obstruction in achieving it.
- Scenario based Risk Identification: Here, creation of different scenarios is seen as alternative methods for achieving a goal. A threat is perceived in case an unwanted scenario is formed.
- Common Risk Check: Some risks are common to every industry and each of them are listed and also checked within a stipulated period of time.
Risk Assessment
Assessment of the risks is done after they are identified depending on their possibility of happening and its effect. This is a simple procedure which is similar to assessing substantial risks and the tough ones such as in the case of assessing insubstantial risks. Assessing these risks becomes almost a guessing game and the best knowledgeable guess gets to decide the plan’s success.
The practice adopted for industries to solve the risk is:
Frequency of occurring × Impact
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