Risk Analysis and Management, used for analyzing and managing the risks involved in projects. It helps for the achievement of better financial returns for sponsors, investors and lenders, and improve the consequences of projects whether large or small. It helps in assisting planners, engineers, accountants, actuaries, lawyers, project managers, public administrators and many who are involved with a project’s success.
Risk Analysis is a phenomena that helps to identify and manage potential problems that could bring out various key business initiatives or projects.
To perform Risk Analysis, we must first identify the possible threats that you face, and then estimate the chances of threats will arise.
Risk Analysis in implementation is complex, as we need to come out of detailed information such as project plans, financial data, security protocols, marketing forecasts, and other relevant information. It’s a planning tool, which could save time, money, and reputations.
When to apply Risk Analysis exactly
Risk analysis is useful in various situations like:
- When we are planning projects, it helps to foretell and neutralize possible problems.
- When we are deciding whether to move or not to move forward with a project.
- When we are improving safety and potential risks in the workplace.
- When we are preparing for threats such as equipment or technology failure, theft, staff sickness, or natural disasters.
- When we are planning for changes in work environment, such as new competitors coming into the market, or changes to government policy.
How to Use Risk Analysis
To perform risk analysis, we perform the following steps:
1. Identify Threats
The first step in Risk Analysis is to identify the existing and possible threats that we might come across. They may be from various sources like
- Estimate Risk
Once identification of threats are done, we need to calculate the possibility of threats and their impact.
One way to estimate the probability of the event occurring, and then to multiply this by the amount it will cost to set things right if it happens.
How to Manage Risk
- Identify possible risks.
- Reduce or allocate risks.
- Provide a rational basis for better decision making in regards to all risks.