Mitigate the Risk: The Importance of Risk Assessments
There are plenty of factors that go into maintaining and protecting a business to ensure future stability and success. While it is important to focus on the positives and how to achieve this overall growth it is equally important to focus on the possibility of unknown, hidden, or undetected risks. This can be done with risk assessments. With properly done risk assessments, businesses can experience benefits including:
- Getting a clearer picture of where assets lie
- Identifying potential threats and understanding the likelihood and impact of them
- Implementing proactive processes
- Recognizing and controlling workplace hazards
- Creating awareness among employees
- Reducing workplace incidents
- Saving costs by being proactive
Simply put, a risk assessment is the identification of hazards that could end up negatively impacting profit, stability, and how an organization conducts business. No matter what industry or size an organization is a risk assessment should always involve at least these five steps:
- Identifying the Risks or Hazards
- Financial – this should include looking into compliance, credit, liquidity, and debt risks. This can include making sure your business is up to date on federal returns, that your business is run ethically, that your business has sufficient cash flow, that your business can meet short and long-term goals, and that all your loan agreement payments, if applicable, are paid on time and in full.
- Operational – this can be broken down into areas like IT and personnel risks. IT can address general risks and security risks by ensuring customer information is protected and that your organization has a strong security plan. For personnel risks, your organization should address factors such as salaries, benefits, contracts, HR policies, and basic employee needs.
- General – this can fall into a lot of categories, but examples include answering questions like is your organization prepared for growth, are finances managed properly and is it profitable.
- Workplace Hazards
- Safety – spills, heights, electrical, or any unsafe conditions that can lead to illness, injury, or death.
- Physical – extreme temperature, prolonged exposure to sunlight, loud noises, or any other physical hazards that are factors within the environment that could cause harm to the body.
- Ergonomic – frequent lifting, awkward movements, repeating the same motions, or any type of hazard when the type of work, body positions, or conditions put a strain on the body.
- Organizational – workload demands, respect, and any psychosocial hazards that cause stress, anxiety, or strain to employees.
- Chemical – vapors, fumes, gasses, or when a worker is exposed to any chemical preparation in the workplace in any form.
- Biological – bodily fluids, fungi, or bacteria or when working with animals, people, or infectious plant materials.
- Evaluating the Risks – answer the questions like who is at risk, what services/products/departments are at risk, how often are they exposed to these risks, how likely are these risks, how severe are these risks or how will these risks affect you long term?
- Deciding on Control Measures – come up with effective strategies and procedures that help protect both employees and the overall business. Implement these control measures and make sure they are communicated throughout the organization.
- Recording Findings – keeping a formal record of past risk assessments can help an organization keep track of hazards, risks and how to address them. These findings should include descriptions of the risks, how to assess them, outlines of evaluations, and detailed explanations of how conclusions were made and how they are to be addressed.
- Revisiting – take the time to review and update your risk assessments when necessary. New risks can be added if an organization has a significant change in staff or procedures, plans on some type of growth, or if it has been a significant amount of time since risk assessments were reviewed.
The Best Fit For Your Business
Now that is just the base of standard risk assessment but they still come in many forms. Finding the best risk assessment for your organization is critical in performing an accurate one which means the organization is identifying and addressing the proper risks in order to protect itself. Here are five common types of risk assessments:
Qualitative Risk Assessment
Typically used in high-risk industries, these assessments measure the severity of a risk and usually measure multiple risks at once. Qualitative data is gathered through personal experience, observations, and knowledge often by an expert or member of management. The benefits of this type of assessment are that they are simple in method, easy prioritization, and have clear presentation options but they have limitations such as subjective evaluation, limited scope, and lack of differentiation.
Quantitative Risk Assessment
This type of assessment puts a numerical value on a risk, allowing organizations to gauge the impact of risk and its cost to the organization. This could look like using 3, 2, 1 instead of high, medium, and low and utilizing the 3×3 or 5×5 risk matrix. This assessment is also essential to support the understanding of the exposure of risks to employees, company assets, and reputation. An organization can get a clear understanding of:
- Potential accident scenarios
- Predicted economic losses
- Risk to specific main safety functions
- Input to operation restrictions
- Identification and assessment of prevention and mitigation measures
The QRA can be calculated using the following equation:
Risk = Severity x Likelihood
Generic Risk Assessment
This type of assessment typically will cover common types of hazards for tasks or activities in the workplace. These are typically not adapted for anything specific and can be used across different locations and industries. While it can be easy to find generic risk assessment templates online, if you use this route be sure to review, adjust and update them accordingly to be effective at mitigating risks.
Site-Specific Risk Assessment
These assessments need to be carried out for either a specific activity or location and are necessary to be effective at eliminating and controlling risks. This is one of the most thorough methods of risk assessments that are meant to protect your workforce, the public, and your business safe from any possible legal liability and reputational damage due to any health or safety breaches.
Dynamic Risk Assessment
These risk assessments are based on essential decision-making because they are used to address unforeseen circumstances that are carried out on the spot due to any significant or sudden changes within the workplace. These assessments are crucial for circumstances such as:
- Introduction of new equipment
- Change of supervision approach
- Threats to safety or security
- Reallocation of work
Regardless of size or industry – understanding your business, the risks it is susceptible to, and which assessments to utilize are key to being proactive instead of reactive when it comes to addressing risks to an organization. All risk assessments should follow the five basic steps and once implemented, do not forget to revisit them for reassessment especially if there is a significant change within the organization.