Risk analysis is the process of identifying and analyzing potential issues that could negatively impact key business initiatives or projects. This process is done in order to help organizations avoid or mitigate those risks.
Performing a risk analysis includes considering the possibility of adverse events caused by either natural processes, like severe storms, earthquakes or floods, or adverse events caused by malicious or inadvertent human activities. An important part of risk analysis is identifying the potential for harm from these events, as well as the likelihood that they will occur.
The risk analysis process usually follows these basic steps:
- Conduct a risk assessment survey: This first step, getting input from management and department heads, is critical to the risk assessment process. The risk assessment survey is a way to begin documenting specific risks or threats within each department.
- Identify the risks: The reason for performing risk assessment is to evaluate an IT system or other aspect of the organization and then ask: What are the risks to the software, hardware, data and IT employees? What are the possible adverse events that could occur, such as human error, fire, flooding or earthquakes? What is the potential that the integrity of the system will be compromised or that it won’t be available?
- Analyze the risks: Once the risks are identified, the risk analysis process should determine the likelihood that each risk will occur, as well as the consequences linked to each risk and how they might affect the objectives of a project.
- Develop a risk management plan: Based on an analysis of which assets are valuable and which threats will probably affect those assets negatively, the risk analysis should produce control recommendations that can be used to mitigate, transfer, accept or avoid the risk.
- Implement the risk management plan: The ultimate goal of risk assessment is to implement measures to remove or reduce the risks. Starting with the highest-priority risk, resolve or at least mitigate each risk so it’s no longer a threat.
- Monitor the risks: The ongoing process of identifying, treating and managing risks should be an important part of any risk analysis process.
The focus of the analysis, as well as the format of the results, will vary depending on the type of risk analysis being carried out.