Before proceeding towards any operations, assesment of the risk factors are very much important. It is a process or product that collects information and assigns values (relative, qualitative, or quantitative) to risks for the purpose of informing priorities, developing or comparing courses of action, and informing decision making.
A risk assessment is a process to identify and rank the risks to your organization in order to fully understand them and develop plans to manage the highest ones. Completing a risk assessment process is vital to the long-term success of any business, but unfortunately is more common medium or large companies. In a nut shell, these are the most common steps to a risk assessment:
Identify: Thinking critically about the industry, market, environment, customers, and vendors, identify and list “what could go wrong?” to your business. These are the inherent risks. Don’t think about what your business is doing as a results of those risks just yet.
Rate: Risks are measured by Impact and Likelihood: “How likely is that to happen?” and “What would the impact be to my business, short and long term?” Once applying a score using both, you have a way to Rate your risks into High, Medium, Low.
Assess: Now, for each risk, objectively (as much you can) assess what people, technology, and processes you have in place to help manage, or minimize those risks. What things reduce the impact or probability of those “things that could go wrong”?
Compare (this is the true value of the exercise): Finally, look for discrepancies between the Risk Ratings and the Assessment of what you have in place. Are there any High Risks that you don’t have much in place to manage? These are areas to focus on. Conversely, do you have any Low Risks that have a lot in place to manage? These are opportunities to potentially cut back on.