How to Put Value On Risk
Of all the business buzz words floating around these days, the word ‘risk’ has to be high up on the list. We all know what it means, but not everyone knows how to fully assess and value it. Here are a few pointers to help put a value on risk:
Of all the business buzz words floating around these days, the word ‘risk’ has to be high up on the list. We all know what it means, but not everyone knows how to fully assess and value it. Here are a few pointers to help put a value on risk:
- You need to do more than simply identify risks and map them on a matrix of likelihood and impact. This is an important step, but not the be all and end all.
- Quantitative assessment using a structured modelling approach is critical.
- Take time to assess all the key risks in detail. As part of this assessment focus on the probability that the risk occurs and the monetary impact of occurrence.
- The outcome of a risk position that has gone bad is often caused by more than one influencing factor. Take these into account.
- Using judgement and experience is important, but beware not to let human nature get in the way. If someone says “that just won’t happen” or “we will just do it better”, without any evidence to support the claim, watch out!
- Don’t just stop at the end of the risk assessment stage. It is critical to develop actionable risk mitigation strategies as well. Assessment won’t protect you, it is the mitigation that will.