Foundations of Business Risk Assessment: A Basic Overview

When studying modern mass marketing techniques, they tell you to write at a 6th-grade level. To that end, let’s break down the complex process of risk assessment into its simplest forms.

What is a Risk Assessment?

Things can and do go wrong in a business. These are risks. Risks can be internal to the company and external. There are many different classifications of risk, but for the purposes of this article, we will mainly focus on just three types of external risk:

• Natural Disaster
• Cyber Attack
• Human Threats

A risk assessment asks two questions:

How likely is this hazard to happen and cause impact to my business?

How prepared am I to deal with this hazard?

Some risk assessments will have you assign numerical values, but we are going to keep this simple and go with High, Medium, or Low ratings to answer both of these questions.

Steps to Take for a Basic Risk Assessment

Step 1: Identify Hazards

Look at each hazard in the list below and rate the likelihood of each hazard impacting your business as High, Medium, or Low.

Step 2: Rate Preparedness

Then, rate your level of preparedness or “mitigation” for each hazard.

Example: If you own a restaurant, your risk of a structure fire will likely be High. If you have proper fire suppression, sprinklers, smoke detectors, fire extinguishers, and training, then your level of preparedness will also be High.

Step 3: Compare Risk and Preparedness

Finally, look for any differences between the risk and mitigation for hazards. If the risk is higher than your level of preparedness, you should do something about it. Write your plans in the Notes column.

Basic Risk Assessment Table

Here is an example of a vehicle repair shop in California:

Review and Improve

Review the results of your risk assessment with the owner, operations manager, HR staff, and insurance agent to help identify additional gaps in preparedness. You should assign someone in your company to take the list of improvements identified, prioritize them, and begin putting in place upgrades, changes, or changes in policies and procedures to help reduce the damage that disruptions can pose.

Taking Your Risk Assessment to the Next Level

If you want to take your risk assessment to the next level, then develop a Business Continuity Plan from Tempest Risk Management. These ISO22301 compliant plans will be your guide to recovery following a business disruption and are tailored to each individual business.

Final Thoughts

Understanding and preparing for risks can make a significant difference in your business’s ability to handle disruptions. By following these simple steps, you can create a solid foundation for your business’s risk management strategy. Remember, continuous improvement and regular reviews of your risk assessment are key to maintaining an efficient and resilient business.