What Is Risk Identification?
Risk identification is a deliberate effort to identify and record key risks associated with your workplace. The objective of risk identification is to understand what is at risk within your scope of work. Thereafter, to develop a comprehensive list of risks based on the threats that might prevent or delay the performance of the objective. Effective risk identification ensures that risks are managed effectively and efficiently.
Risk Identification Process
It is critical to do a comprehensive identification of any possible risk associated with the scope of work and to record it. The reason being that risks that are not recorded at this stage may be excluded from further analysis. For a company to effectively and efficiently manage risks properly they have to know what the risks are. Therefore it’s imperative that all risks are identified and addressed regardless of how big or small or if it’s within the company’s control or not. In addition, companies should adopt an on-going process to identify new risks that might arise from changing circumstances.
Senior officials should create an environment where everyone within the company should be able to identify risks. The more people involved the better chance you have of creating a comprehensive risk list.
How To Perform Risk Identification
It’s important to understand the company’s objectives when assessing risk. The process of risk identification must identify undesirable outcomes, unwanted events, and emerging threats. Understand that risk will always exist whether you have control over it or not. Along with risk there also exists an opportunity. This means that when identifying risk you might see the potential to improve performance.
Be careful not to get bogged down in theoretical detail. Your approach should always be how you can practically manage the risk.
Below Are Some Key Steps Needed To Effectively Identify Risks
- Gather information from more that one source to identify risks.
- Document the risks.
- Understand what to consider when identifying risks.
- Apply risk identification techniques.
- Assess the effectiveness of the risk identification process.
Gather Information From More Than One Source To Identify Risks
- Look at past records and try to find patterns.
- Interview employees.
- Look at companies doing similar work and make a note of how they deal with their risks.
- Look at evolving work environments and the impact it might have.
How and why the risk can happen (causes and consequences)
- Existing internal controls that may likely reduce the consequences of the risks.
- When identifying a risk consider – circumstance, cause, and likelihood.
- Ask – What is the likely outcome of the event? It is the combination of the above-mentioned elements that make up risk and this level of detail will allow the risk assessor to better understand the risks.
Understand What To Consider When Identifying Risks
Apply Risk Identification Techniques
Use the following:
- Flow charts
- Brainstorm with a team
- System analysis
- Scenario analysis
- Judgments based on past experiences.
Assess The Effectiveness Of The Risk Identification Process
Include the following documentation.
- Information sources and participants
The risk register should contain the following information.
- Risk category
- How and why,
- Impact the risk can have
- The cost associated with the risk
- Likelihood and consequence
- Risk level rating
- internal controls
- Risk profile
As mentioned at the beginning of the article, risk identification is a deliberate effort to identify and record key risks associated with your workplace. By identifying these risks you can understand what they are and develop a process to mitigate your exposure to risk. Every business should have a clear process in place in dealing with risk.