BUSINESS RISK ANALYSIS

What is risk in business?

Risk can be viewed as any potential event or circumstance that has a negative impact on your company. This could be a cancelled event and loss of income, closures due to bushfire or flood, you lose your work laptop, or machinery breaks down.

Why do you need to assess risk in your business?

Assessing risk around your business allows you to be fully aware of the potential issues. This process allows you to establish processes to alleviate the risk and manage them before they arise.

How to use the risk matrix:

1. Identify all of your potential business risks.
2. Using the risk analysis matrix, assess how likely they could occur verses the impact they could have to your business.
3. Once you have established where they sit in the matrix, start with your extreme risks. Write a process on how to manage the risk. You may reduce (put actions into play so you can change the outcome, i.e train staff in the procedure), avoid (purchasing equipment to do the job), transfer (use a contractor) or accept (leave it as is, it might be your only option).
4. Regularly review your risks to see if there is any process you can change and make better.

Consequences stages:

Insignificant, risk is easily mitigated by day to day practises.

Minor, Delays up to 10% and 10% added to the budget.

Moderate, Delays of up to 30% and 30% added to the budget.

Major, Delays of up to 50% and 50% added to the budget.

Catastrophic, project abandoned.

Likelihood stages:

Certain, more than 90% chance.

Likely, 50%-90% chance.

Moderate, 10%-50% chance.

Unlikely, 3%-10% chance.

Rare, less than3% chance.

Extreme ratings are categorised as:

Consequences 'Moderate' and above, with the a 'Certain' likelihood.

Consequences 'Major' and above, with the a 'Likely' or 'Moderate' likelihood.

Consequences 'Catastrophic' and above, with the a 'Unlikely' likelihood.

High ratings are categorised as:

Consequences 'Insignificant' to 'Minor', with the a 'Certain' likelihood.

Consequences 'Minor' to 'Moderate', with the a 'Likely' likelihood.

Consequences 'Moderate', with the a 'Moderate' likelihood.

Consequences 'Major', with the a 'Unlikely' likelihood.

Consequences 'Major' to 'Catastrophic', with the a 'Rare' likelihood.

Moderate ratings are categorised as:

Consequences 'Insignificant', with the a 'Likely' likelihood.

Consequences 'Minor', with the a 'Moderate' likelihood.

Consequences 'Moderate', with the a 'Unlikely' likelihood.

Low ratings are categorised as:

Consequences 'Insignificant', with the a 'Moderate' likelihood.

Consequences 'Insignificant' to 'Minor', with the a 'Unlikely' likelihood.

Consequences 'Insignificant' to 'Moderate', with the a 'Rare' likelihood.