What are the 7 Essentials in Risk Identification?

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7 Essentials to Risk Identification

A risk is an uncertain event that affects the desired objectives or goals. Risk is ever-present and almost unavoidable unless proper methods are implemented. The workplace must utilize risk management, the creation of a reference framework that will allow companies to handle risk and uncertainty, to avoid unnecessary setbacks or outcomes.

There are multiple steps in the management process and important objectives defined within each step for maximum risk minimization and preparedness. One of the most important steps is the first: “Risk Identification”. Without prior identification, the consequent steps will not be useful or provide detailed analysis for company utilization.

Five Basic Steps

Risk management is widely used due to its accurate and useful insights into future pitfalls. There are numerous variations of the management model, ranging from basic to comprehensive, dependent on the business size, history, and objectives. However, there are five basics that envelop the steps found in the process.

  1. Risk Identification: reveals what, where, when, why, and how something could happen and potential effects on the objectives.
  2. Risk Analysis: Establish probability and potential outcomes of each risk. What is the potential effect on goals and objectives
  3. Risk Evaluation: Compare risks’ magnitude and rank risks according to prominence and consequence.
  4. Risk Treatment: Also considered Risk Response Planning. Create risk mitigation strategies, preventative care, and contingency plans based on assessed risk value.
  5. Monitor Risk: Risk management is a non-stop process that adapts and changes over time. Repeating the processes assure maximum coverage of known and unknown risks.

A project risk register can be used to efficiently monitor risks as well as streamline the data for universal implementation. The register is a predetermined organizational method documenting the steps, data, and results of risk management projects that can be shared and interpreted easily with other businesses. They are consistent, compact, concise, complete, use control, as well as invite communication and commitment. The project risk register begins formation through risk identification.

Risk Identification

Before identification can occur, internal and external contexts should be defined. What are the organization’s objectives? This context provides the information required for comprehensive risk identification and further management steps.

Risk identification is the first part of the proactive management process. It provides the opportunity to raise risk concerns before they occur, keeping them from damaging the business operations or goals. The objective is to identify all possible risks. Identification should begin as early as possible in the project, even prior to plans and goal approval, in case overt risks deem the entire development unfit. Elimination from consideration or solution development does not happen during this step of the process. Simply find and document the potential risks for further analysis.

Seven Identification Essentials

Identification is a process of brainstorming. It isn’t an exact science and should involve continuous implementation as new phases, experiences, and viewpoints are introduced. Being vital to the management process, there are some essentials to risk identification that guarantee maximum results.

  1. Team Participation
    Face-to-face interactions between project managers and the team promise better and more comprehensive communication. The team must feel comfortable to share and find hidden or elusive risks.
  2. Repetition
    Information changes and appears as the risk management process proceeds. Keeping identified risks current and updated means the system is focused on mitigating the most prevalent issues.
  3. Approach
    Certain objectives require distinct approaches to best combat identification failure. One method is to identify all root causes, undesirable events, and map their potential impacts. Another is to identify essential performance functions the project must enact or goals it must reach to be successful, then find possible issues with each function or goal. Both methods work well, but the latter may be easier due to its defined scope.
  4. Documentation
    Consistent and exhaustive documentation leads to comprehensive and reliable solutions for a specific project or future risk management team’s analysis. Most communication is recorded by a project manager and data is copied, stored, and updated for continued risk prevention.
  5. Roots and Symptoms
    It is essential in the risk identification phase to find the root causes of risk instead of mistaking them with the symptoms. A symptom can be confused with the root cause, making it critical to discover the origin of risks and denote what their symptoms are. Other essentials of risk identification involve the analysis phase. This is where identified risks are further researched and understood.
  6. Project Definition Rating Index (PDRI)
    PDRI is a risk assessment tool that helps develop mitigation programs for high-risk areas. It facilitates the team’s risk assessment within the defined project scope, budget, and deadlines. It also provides further detail of individual risks and their magnitude, represented by a score. The summation of scores is statistically compared to the project performance as a certainty level for the entire project
  7. Event Trees
    Commonly used in reliability studies and probabilistic risk assessments, event trees represent an event followed by all factors and faults related to it. The top of the tree is the event and it is supported by any condition that may lead to that event, helping with likelihood visibility.

Risk identification is the first step towards risk minimization and understanding. If a risk isn’t discovered in the first phase, it may be found and included later due to the nature of risk identification. It is a non-stop process involving teamwork and communication.