BSCom 2023-2025 Morning

IRM – December 09, 2024

UNDERSTANDING THE RISK IDENTIFICATION

PROCESS
What is Risk Identification?
By understanding the risks involved, you can establish measures to protect yourself and your
business from potential problems.
Risk identification is the process of determining potential risks to your business. This can include
anything from a natural disaster that could damage your property to a disgruntled employee who
could sabotage your systems. As a business owner, you’re constantly faced with risks. Some are
bigger than others, but they all have the potential to impact your bottom line. That’s why it’s
important to have a system in place for identifying risk.
When you know what the risks are, you can weigh the pros and cons of any decision and make an
informed choice that’s best for your business. Risk identification is a critical part of a robust risk
management system and a key tool for running a successful company.
Why is it Important?
When you’re running a business, it’s important to be aware of the risks that come with it and
to communicate it. That’s where risk identification comes in. By identifying and assessing the risks,
you can come up with a plan to mitigate them.
Risk identification is an essential part of any business, but it’s especially crucial for small
businesses. For one, small businesses are more vulnerable than larger ones, so they need to be extra
vigilant about risks. And for another, small businesses have fewer resources to fall back on if
something goes wrong.
But why is risk identification important? Here are some reasons:
 It helps you understand what could go wrong and how you might be able to prevent it.
 It allows you to put together a plan for dealing with any potential risks that might arise.
 It helps you make better decisions when it comes to your business.
By being aware of the risks, you can take steps to protect your business and minimize the chances
of something going wrong. Risk identification—along with other functions of a comprehensive risk
management strategy such as risk assessment, risk analysis, and risk control—is an essential part
of good business practice, so make sure you are fully aware of the risks involved in your industry.
What are its Benefits?
When it comes to risk identification, there are a few key benefits that your business can reap:
 Identify potential threats to your business. This includes both internal and external threats,
so you can be prepared for anything that comes your way.
  Assess your business’s vulnerabilities. Once you know where your weak spots are, you can
take steps to shore them up and protect yourself from possible attacks.
 Make better decisions. By understanding the risks involved in any given situation, you’ll be
able to make more informed choices and avoid costly mistakes.
Overall, risk identification is an essential part of any successful business strategy. It allows you to
identify potential threats before they cause damage and helps you make sound decisions based on
accurate information.
The Process of Risk Identification
When it comes to risk identification, a few key steps need to be followed in order to ensure that all
possible risks are considered. Let’s go over them briefly:
1. Risk Statement
The first step is making a risk statement. This is a brief, concise description of the risk that you’re
looking at.
2. Basic Identification
In this step, you will list all the relevant facts about the risk. Examples include what could happen,
who could be affected, and so on.
3. Detailed Identification
This is where you go into more detail about the risk, including what could cause it and how it could
affect people or businesses. Here, you can use various methods such as brainstorming, interviews,
and documentation.
4. External Cross-check
In the external cross-checking step, you will look for any potential risk or relevant information
outside the project. Some methods you can use are checklists and categories.
5. Internal Cross-check
This is where you look for any potential risks inside the project that may have been missed in the
previous steps. To do internal cross-checking, break down a work structure or a project document
in order to list down any potential risks.
6. Statement Finalization
The last and final step is statement finalization. This is where you put all the information together
and come up with a final statement about the risk.
Strategies for Identifying Risks
When it comes to risk identification, it’s all about being proactive. You need to be constantly on the
lookout for potential threats to your business so that you can take steps to mitigate them before
they become a problem.
How do you do that? There are a couple of different methods you can use. Below are some examples
you can use:
 Brainstorming – It involves coming up with a list of all possible risks that could affect your
business.
 Interview – Interview your team members, customers, and suppliers to get their thoughts
on potential risks.
 Online resources – Some good examples of these are enterprise risk management blogs
and forums. They can be a great source of information on new and emerging risks.
 Checklists – A risk assessment checklist usually consists of a list of common risks with their
causes and typical impacts. It is often used once and aimed at a specific market or
technology area.
 SWOT analysis – It is a great method to understand business risks or project risks using
different factors—strengths, weaknesses, opportunities, and threats.
 Root cause analysis – The root cause analysis method analyzes and investigates a past risk
of the project by comparing how they relate to the current project.
 Flowcharting – A flowchart helps in showing the activities and decisions through
illustration. It also shows the flow of data and control through a specific area.
Common Risk Identification Mistakes
When you don’t take the time to identify risks, you’re opening yourself up to a lot of potential
problems.
For starters, you could end up making costly mistakes if you don’t understand the risks and hazards
associated with your business. Also, if you’re not prepared for potential risks, you’re not going to be
able to respond quickly when they occur. That could lead to some serious damage to your business.
Finally, as a stakeholder, if you’re not aware of the risks involved in your business, you could be
making decisions that are putting your company at risk and reducing its life cycle. So it’s really
important to take the time to identify and assess all the risks involved in your operations.
Risk identification is an important part of security and contingency planning, and it’s something
that you should be doing regularly as part of your overall risk management process.