Every company is exposed to risks that could threaten to shut it down. These risks might be obvious or less so. However, a robust risk management plan ensures a business's continued operation. Read on to learn more about risk identification, the importance of risk identification to your business and its risk management process, and how to conduct a thorough risk identification process to identify possible risks.
What Does Risk Identification Mean?
Risk identification involves the detection of any threat to an organization, its business processes, and its workforce. These threats pose a potential risk of damaging a business's performance, the quality of its services or products, its reputation, or causing any other type of damage or loss.
Risk identification often refers to cybersecurity and plays a vital part in the risk management process involved in cybersecurity audits and cybersecurity analytics. However, companies also need to identify risks relating to accidents, natural disasters, and even human error, among others. The aim is to find any weaknesses or potential threats to a business, its operations, or its employees.
During the risk identification phase, the goal is simply to identify and categorize all potential risks. Even seemingly insignificant risks should be identified. At this stage, potential risks are not evaluated or judged; they are merely recorded.
Once all the risks are identified, a risk analysis or risk assessment can be done. During a risk analysis, risks can be evaluated and classified according to the level of risk it poses. These can then be noted in the company's risk register or risk assessment matrix according to the different risk categories.
During such a risk evaluation and analysis, risk could potentially be mitigated if needed and, where possible, as part of a company's risk management system. Risks that cannot be mitigated (residual risk) can be prepared for at this stage.
Why Is Identification So Important When Working with Potential Risk?
If you have identified potential risks, you could take steps to mitigate those risks. You could also be better prepared to handle any of those risks if or when they happen, hopefully lessening the impact on your business, its operations, and staff.
What Are the Best Methods of Identifying Risk?
Brainstorming is a relatively informal approach to generating new ideas and creative solutions to existing or potential problems. When brainstorming with the aim of identifying risk, different role players in an organization come together to discuss the topic. Individuals from different levels in the organization bring their knowledge and experience and discuss unique perspectives on anything that could potentially pose a risk to the organization, its business operations, and its workforce.
Interviews tie in with brainstorming. Key stakeholders might be interviewed to find out their opinions and perspectives on potential risks to the company, its business practices, and its staff. These stakeholders are individuals who have an interest in the company. Usually, these individuals are investors and have contributed financially or physically to the growth of the business.
Stakeholders will likely have a very different point of view regarding specific risks than employees working in the frontline or managerial positions.
These stakeholders could be a part of brainstorming sessions. However, they may not want to be involved in the nitty and gritty of it all. They may also not have the time to sit in brainstorming sessions, which could be very time-consuming. In these cases, interviewing them to get their input might be a better option.
Not all situations, projects, or vendors will pose the same risks to a business. Even so, many of the risks might be similar.
A checklist of potential risks could be helpful when identifying risks relating to a new situation, project, or vendor. This checklist can be a dynamic working document listing all or most of the most common risks that a company might be exposed to.
Risks might be added or removed as they become more or less relevant. This checklist could make risk identification more effective and efficient. It is essential, however, to keep in mind that this checklist does not necessarily contain all potential risks. Therefore, it would be prudent to reevaluate the checklist as new situations arise.
Narrowing things down
Sometimes risks might be apparent, and in other cases, they may be less so. Therefore, when identifying risks, start with the most obvious ones. From here, it could be easier to identify additional risks that might not be apparent.
Remember to consider aspects that might be taken for granted. For example, you could consider whether your employees have the proper training and are up to date with their skills Or what you might do in the event of a natural disaster.
Find different facets of risk
Various kinds of risks could threaten an organization. This could include financial, safety and security, technological, legal or regulatory, reputational, or operational risks. Look at each one of these different aspects when establishing whether there might potentially be risks that could affect your business.
Consider the worst-case scenario
Risk identification is made to find possible things that could go wrong. This will enable you to take quicker action in the event that an incident does occur.
During a risk identification process, it would benefit you to consider the worst-case scenarios. This could help you identify risks you might otherwise have overlooked.
Consider risks that might seem improbable, unlikely, or even impossible. List each and every potential risk during the identification stage. Then, you could evaluate the likelihood of each risk occurring later on in your risk management process.
How Do I Mitigate Risk?
Each risk is unique, so you will need a unique way of handling it. A risk management system or risk management program will help guide employees and role players when an incident occurs. This risk management plan will detail specifics around how to manage risks and who the important role players are to lessen the impact when an incident occurs.
How Can RiskRecon Help Me?
RiskRecon, a Mastercard company, identifies and categorizes risks based on breach likelihood, severity, and origin. We sort third-party vendors based on their cybersecurity posture so you can make informed decisions and secure your data. Try your 30 day free trial today!