A risk assessment procedure that successfully serves your organisation is more than creating a list of risks. Risk identification is key, but it is the ‘assessment’ part that informs your process and transforms your list into a means to mitigate your risks and capitalise on opportunities.  Read on and discover how to improve your organisation’s risk assessment process in four simple ways.

What is an Enterprise Risk Assessment?                                     

An enterprise risk assessment (ERA) is a well put together, continually evolving, and consistently executed process. Using qualitative and quantitative methods it examines potential scenarios and events that could jeopardise your business objectives.

In a nutshell, your risk assessment should help management understand what they don’t know; recognise the risks that are important, and determine how they relate to the organisation’s strategy.

A strong ERA process has no template as each organisation is different. Your risk assessment process must be tailored to the distinct requirements of your company and should be devised according to your company culture, organisation structure, risk tolerances and so on.  However, there are four considerations that will improve any company’s risk assessment process and we have scrutinised them below.

Four Ways to Improve Process:

1. Open up the Discussion

Try and avoid undue bias and the loss of valuable risk insights by limiting the involvement of the risk assessment process to senior executives. Cast your net wide across the whole organisation to include the perspectives of C-Suite, middle management, and front-line staff.

You can gather critical information and viewpoints using surveys, interviews, workshops, and meetings. Involving the appropriate people will not only improve your process by avoiding oversight it can also strengthen corporate resiliency and heighten accountability.

2. Keep It Fun

A risk assessment is something that needs to be revisited regularly, so keep it fun. Get creative and think of new ways to brainstorm and discuss risks and their solutions. Imaginative approaches may include role-play exercises, scenario analysis or tabletop walkthroughs. By changing it up and thinking outside the box you’re more likely to glean information on a new and unique risk issue.

3. Make The Data Work

It is easy to get bogged down in data, and overcollection and over-analysis can actually be detrimental to your organisation. You must make the data work for you and ultimately transform all this information into something usable for decision making.

When evaluating risk use a multidimensional approach and examine the probability of occurrence and impact:

  • Velocity (how soon will the risk affect the organisation)
  • Preparedness (how prepared is the organisation to respond to the risk)
  • Reputational impact
  • Persistence (how long will the effects last)
  • Interdependency of risks

You will need to consider the appropriate criteria to assess your information and the simplest way to start this process is to distinguish qualitative from quantitative data. Quantitative, by its nature, is measurable and easier to handle but qualitative data can also be manipulated for risk scoring and ranking.  This is often achieved by assigning numbered scales to surveys e.g., “high impact” (4) “low likelihood” (1). It is advisable to avoid odd-numbered scales to prevent ‘sit on the fence’ responses. Heat maps are another great way to score organisational risk:

Remember that your risk assessment is not just looking at negative impacts but positive ones too. When exploring the impact, probability, velocity, and preparedness, your firm can also identify opportunities arising from a scenario.

4. Look To the Future

ERA processes can often be heavily influenced by historic risk information and whilst this is useful it is important that you don’t become too retrospective. You need to be continuously reviewing and refreshing your risk assessment so that it remains dynamic and ensure you stay abreast of the global business environment.

Make sure to take the chance to project potential risks and opportunities that may impact your organisation’s future. Insights gained through a strong ERA process could be invaluable to ongoing business strategy discussions and future decision making.

So don’t end with just a list. Use these tried and tested steps above to improve your ERA process and drive growth. 1RS aims to help companies increase the robustness of their business strategy through better anticipation and management of risks. We can assist with assessing the enterprise’s risks, either across the entity or at various operating units, and provide the capabilities for managing those risks. Get in touch and speak to one of our experts.