Risk assessments are becoming increasingly important due to the inherent dangers of running a business. These risks might include major hazards like the rise of cyberattacks or even natural disasters, but risks can also include employee conflicts and stress. The goal in a risk assessment is to determine any potential hazards that can impact a business's ability to operate. By conducting a risk assessment, businesses can identify potential risks and develop strategies to mitigate them.
Risk assessment is one of the major components of a risk analysis. Risk analysis is a systematic process with multiple steps that intends to identify and analyse all potential risks and issues detrimental to the business, which is an ongoing and regularly updated process. Risk analysis and risk assessments are interconnected and can be used individually.
Risk communication is the process of exchanging information and opinion on risk to concerned parties. Risk management is the proactive control and evaluation of threats and risks to prevent accidents, uncertainties and errors. Along with risk assessment, these are vital elements that help make informed decisions like mitigating risks.
The goal of a risk assessment is to proactively identify, analyse and evaluate potential hazards and risks that could impact a business. Doing so can help businesses plan to mitigate risks and improve their resilience and longevity when faced with challenges. The goal of a risk assessment is to answer these key questions:
- What could happen?
- Under what circumstances could that happen?
- What are the possible consequences?
- How likely is it to happen?
- Is this risk already controlled for, or is further action needed?
Performing a risk assessment involves three main steps:
- Hazard/risk identification
This involves identifying potential hazards or risks to the business, such as cyber threats or workplace accidents. - Risk analysis and evaluation
Once the hazards or risks have been identified, the next step is to analyse and evaluate the risks that are associated with them. This includes trying to determine the potential severity of the harm it could cause. - Risk control
Finally, businesses must determine appropriate ways to mitigate the hazard or control the risk when the hazard cannot be mitigated. Control could involve implementing new policies or procedures, training employees, or even investing in new technology or equipment that could lower the risk.
To perform a risk assessment, there are a few key steps:
- Identify the risk to the business
This involves determining which areas of the business are at risk in some way and what those risks might be. - Determine the likelihood and severity of the risk
This includes assessing the likelihood of the risk materialising and the potential severity of the harm it could cause. If something could cause extensive damage but isn't likely to happen, that could still be worth mitigating. - Identify actions necessary to eliminate the hazard or control the risk
Once risks are identified and evaluated, the person performing the assessment will determine appropriate ways to eliminate the hazard or control the risk when the hazard cannot be mitigated. - Evaluate the effectiveness of the control measures
Once the control measures have been implemented, it is important to evaluate their effectiveness to ensure that the hazard has been mitigated or controlled. - Monitor to make sure the control continues to be effective
Risk assessments should be performed on an ongoing basis to ensure that control measures remain effective. If something is not effective, it's important to change strategies. Monitoring also includes identifying new risks as they arise. - Keep any necessary documents or records
Documentation may include detailing the process used to assess the risk, outlining any evaluations or detailing how conclusions were made.
One example where risk assessment plays an essential role is in manufacturing. Manufacturers performing risk assessments must consider the following:
- The lifecycle of a product, process or service.
- The education and training the workers have received.
- How a person would react in a particular situation. What is the most common reaction by a person if a particular machine malfunctioned?
It is important to remember that the assessment must take into account not only the current state of the workplace, people, technology, suppliers and processes, but any potential situations as well. By determining the level of risk associated with the hazard, the employer and the health and safety committee (where appropriate), can decide whether a control programme is required and to what level is needed to ensure a resilient organisation.
There are different approaches to risk assessment, including:
- Risk control self-assessments
These assessments are typically conducted by the business's own management and teams to identify and assess risks in their workplace. - Project risk assessments
These assessments are focused on specific projects that a company hopes to accomplish at a specific point. These assessments are used to identify and manage risks associated with those projects and help the project progress smoothly. - Application risk assessments
These assessments are focused on specific software applications and are used to identify and manage risks associated with those applications. - Third-party risk assessments
These assessments are conducted on vendors, suppliers or other third parties that have access to a company's information or assets. Third parties can pose a risk for companies, so evaluating those risks can help protect a company. - Required specific assessments for certain legislation
There are legal requirements for some risks, such as the handling of hazardous substances (according to COSHH regulations, 1998) and manual handling (according to Manual Handling Operations Regulations, 1992).
A risk assessment chart is based on the principle that a risk has two primary dimensions: likelihood and impact, each represented on one axis of the chart. This allows businesses to plot risks on the chart, which helps them determine priority and resource allocation. The chart typically includes diverse levels of risk, such as low, medium and high. By using a risk assessment chart, businesses can prioritise the risks that require immediate attention and allocate resources accordingly.
If a risk has a high impact and low likelihood, the company can determine what level of risk that poses. If something has a high likelihood but minimal impact, they can also evaluate how that compares to other risks.
Identifying risks by using the risk assessment process is a key element when ensuring the smooth running, resilience and success of the business. Incidents interrupt business operations, so preventing and mitigating as many as possible keeps a business smoothly operating. By conducting a risk assessment, businesses can:
- Create awareness of potential risks and hazards. This helps businesses understand the potential risks and hazards that may affect their operations, allowing them to take proactive measures to mitigate them. Management will also be more aware of the risks.
- Improve resilience. By preparing for potential risks and hazards, businesses can improve their resilience and ability to recover quickly from disruptions. Having a risk management and recovery plan in place helps companies bounce back from risks and hazards.
- Comply with regulations. Certain industries and activities may be subject to regulations that require regular risk assessments, such as healthcare, finance and construction.
It is important to know if your risk assessment was complete and accurate. It is also essential to be sure that any innovations, transformation initiatives or changes in the business have not introduced new risks or changed risks that were once ranked as lower priority to a higher priority. It is good practice to perform an assessment regularly to ensure your control methods are effective. Risks are always shifting, so companies need to evaluate and evolve with them.
There are many reasons or situations that might necessitate a risk assessment, including:
- Before new processes, services or activities are introduced. A risk assessment should be conducted before implementing any new processes, services or activities to identify potential risks and hazards.
- Before changes occur to existing processes, services or activities. When changes are made to existing processes, services, activities or tools, a risk assessment should be conducted to identify potential risks that could come with those changes.
- When hazards are identified. If a hazard is identified in the workplace, a risk assessment should be conducted to determine the risk associated with that hazard and develop appropriate control measures.
It is important to monitor the risk scores calculated by your risk assessments to ensure that the control measures remain effective. Additionally, perform regular risk assessment to identify new risks as they arise. By staying on top of risks businesses can:
- Ensure the effectiveness of control measures. Regular reviews can ensure that the risk management plan and control measures are working effectively when put into practice.
- Identify changing risks. As a business evolves and innovative technologies, processes or activities are introduced, new risks may emerge. Monitoring risks can help businesses identify new risks and take measures to control the hazard.
