Simple But Effective Risk Analysis!

It is impossible that improbable will never happen.

-Emil Gumbel, Mathematician

Risk is part of every endeavor.  By analyzing your situation, you can determine the risks associated with a course of action and then reduce the risk to improve the chance of success.   

I have spent a lot of timing in risky situations and I have found understanding the associated risks will ensure success.  As a military pilot, I accomplished an Operational Risk Management (ORM) evaluation before each mission.  ORM allows you to quantify the risk you face, and determine if a mission is worth the risk.  I have used risk analysis in business to determine if a startup business was worth the investment.  I have also used risk analysis as an emergency manager and emergency management instructor, risk analysis allows the emergency manager to determine what mitigation steps should be taken or how to prepare for a possible disaster.  I have diverse experience and I have found risk analysis improves the chance of success, saves lives, saves property and improves profitability.

What is risk?  From Merriam-Webster: 1- possibility of loss or injury, 2-  someone of something that creates a hazard. I have a simple definition; risk is the likelihood a hazard will occur.  A hazard to a business is the loss of a large customer; a hazard to combat mission is flying against an enemy with an SA-14 surface to air missile or the hazard to the emergency manager is the breaking of a dam.  What is the likelihood a hazard will cause damage… it is the risk. 

In risk analysis we measure the likelihood of a hazard impacting your endeavor and the consequence it causes.  There are complex risk analysis tools available and risk analysis consultants but I will present a simple method to capture your risks and rank them. 

The Risk Analysis Process:

During the Risk Analysis, identify the hazards that directly impact your business, endeavor or operations’ process. There are many hazards in the world but what effects you directly.  Indirectly a storm could effect the delivery of your products, the hazard is not the storm to you, but the failure of your logistics operation to deliver products as schedule… does that effect your business?

  

1-   Brainstorm Hazards: What hazards effect your business? 

2-   Determine the likelihood a hazard will effect you and assign a numerical value to the hazard, 1- low probability of a hazard effecting you to 5- a high likelihood a hazard will occur.

3-   What is the consequence of a hazard’s impact on your business? Rank according to the problems associated with a hazard, 1- low to no effect on the business to 5- the business’ operation may fail.

4-   Total up he likelihood and consequence thus you have the risk to your business. 

5-   Rank the hazards based on the risk

6-   Consider methods to avoid, mitigate or prepare for the risk.

Preparedness is your fallback position, first avoid a risk if you can still accomplish your goals, secondly mitigate the risk if the costs are affordable and finally be prepared to respond if the risk effects your operation.

What do you think?  Will disaster strike?  Lightning doesn't strike twice?

Be prepared!

Michael James Smyth