Risk identification is identifying potential business risks and analyzing them to learn about their effects on the business. Risks come in many forms for businesses and different industries may have different risks. For example, a software development company and a construction company may share the risk of losing revenue if they don’t upgrade their tools for modern processes. However, they can carry their own industry-specific risks like the potential for injury on the job or intellectual property risks.
Why is risk identification important?
* Identifying industry challenges: Sometimes, risks are industry-related and can be safety risks or volatility because of the industry itself.
* Meeting legal standards: Risk identification helps a business understand if it needs to meet certain legal requirements.
* Appealing to investors: Investors typically look for low-risk, high-yield investments.
* Making projects more efficient: Businesses also use risk identification on a smaller scale for individual projects or practices.
Ways to identify risk
Brainstorming is the act of gathering team members to think about and discuss a subject and to form solutions to any identified problems. This meeting allows a team to speculate on ideas, discuss facts and look at a project’s future.
2. Stakeholder interviews
Stakeholders are the people who have an interest in your project or business, and interviewing them may help you better understand what they believe are the biggest risks. They understand risk from an outsider’s perspective as an investor, not a laborer or leader.
3. NGT technique
The NGT, or nominal group technique, is another method of brainstorming that offers a more in-depth approach to the subject. Participants write their own ideas about the challenge without discussing it directly with other group members.
4. Affinity diagram
An affinity diagram is a diagram that organizes data into categories based on their similarities. Ask each team member to write what they believe are potential project or company risks and file each response under a few categories.
5. Requirements review
A requirements review is a review of a project’s labor, material or financial requirements, and allows the team to analyze requirements often and identify potential risks quickly.
6. Project plans
A project plan is a basic outline of the project and its needs. This includes things like material and labor needs, the timeline for the project and any risks that come with it.
7. Root cause analysis
A root cause analysis is an investigation of previous project risks and how they relate to one another and the current project. The root cause can be anything from financial challenges to outdated equipment or poor-quality materials.
8. SWOT analysis
A SWOT, or strengths, weaknesses, opportunities and threats analysis, is a great way to understand a project’s or business’s risks alongside other important factors. A thorough SWOT analysis can show investors why a business or project is worthy of investment and helps the team better understand their efficacy in reaching goals. A SWOT analysis examines four factors:
* Strengths: Areas where the team excels and how they relate to projects.
* Weaknesses: Areas where the team can improve to increase productivity and efficiency.
* Opportunities: Areas where the team or business can improve or expand.
* Threats: Areas of risk for the project or business and how the team can minimize those risks.