Risk identification
Risk identification is a process that contains many activities such an exposing and capturing details off all risks that may affect the project, process, company. Tools that can be used for risk identification are probability theory, operations research, systems analysis, decision theories. What is more, it is identifying the risk before it occurs, so it gives a chance to deal with it before it happens. Once a risk is recognized, it becomes a challenge or even an opportunity for management rather that an unexpected event. That is why risk identification became an important part of managing. Risk identification may prevent from many different unwanted events such a reputation damage, processing errors, financial penalties, client loss, value loss. The fact is that it is not possible to identify all risks, because, for example, some risks are a reason of random chances, some risks are sequences of future decisions, so for now, can be hidden and some risks may arise as a result of an external factor (shareholder's decision) [1] [2].
Risk categories
Risk can be divided into three main categories [3]:
- operational risk - results from inadequate or failed internal processed, systems, technology or people.
- financial risk - the possibility of losing money by a company, investors, etc. It includes credit, liquidity, market risk.
- strategic risk - may arise from an abortive business plan or unexpected changes in the strategy.
Risk categorization is a basic part od risc identification.
Few common risk identification techniques
For risk identification several techniques may be used [4]:
- Brainstorms - the most common technique which is also the most creative. It can be very powerful since the main idea of it is to work together and discuss all things which are important for each project participant. This method can be treated as a game so it is very effective because anything can be said without criticism.
- Checklists - this method use risks identified in previous similar project, both that which occurred and which not. There is a question for every risk and the answers help capture possible risks in the future.
- Interviews - this technique is similar to the brainstorms, but the voice has one person. Talk to people is the most effective way of identifying the risk, so in this method, for example, a key project manager is asked about risk.
Footnotes
| Risk identification — recommended articles |
| Litigation risk — Risk classification — Probability of success — Opportunity risk — Risk management policy — Global risk — TOWS analysis — Strategic risk — Risk category |
References
- Burtonshaw-Gunn S., (2009), Risk and Financial Management in Construction, Gower Publishing, Ltd., Farnham.
- Hillson D., (2003), Effective Opportunity Management for Projects: Exploiting Positive Risk, Marcel Dekker Inc., New York.
- Loosemore M., (2012), Risk Management in Projects, Routledge, London.
- Segal S., (2011), Corporate Value of Enterprise Risk Management: The Next Step in Business Management, John Wiley & Sons, New Jersey.
- Snyder R., (2004), Degree to Which Project Managers Have Implemented Risk Management Planning, Identification, Evaluation and Strategies Within Information Systems Projects, Universal-Publishers, Boca Raton.
Author: Weronika Kaca
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