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An integral part of all activities, the risk is one of the most important issues that should be taken into account. To achieve one’s goals and reap profit with minimal loss, it is necessary to consider several components and design a corresponding risk assessment strategy because financing and risk management are correlated (Rampini, Sufi, and Viswanathan 283). While the approaches may differ, the following elements are to be addressed.
First and foremost, one should single out possible hazards in terms of natural and human factors. Fires, explosions, pandemic diseases, terrorism, and workplace violence may serve as examples (Department of Homeland Security par. 8). Every sphere is associated with a certain set of hazards and they may develop over time, especially if a business changes its location and domains of influence. To formulate an effective strategy and refer to the urgent issues, one should list the hazards, constantly monitor them, and make corrections if necessary.
Probability and Magnitude
The diagnosed risks are not equal. One can use the possibility and magnitude to describe their imbalance. The first criterion pertains to the degree of probability of a particular scenario. The likelihood that a given event will occur is different in different areas and regions; for instance, the earthquake hazards are high in Indonesia, Japan, Nepal, and some other countries (Curtis and Carey 5). As for magnitude, the possible level of risk should be estimated. The assessment strategy should be based on the data concerning the most frequent, destructive, and probable disasters.
Assets at Risk
After hazards and their probability are identified, it is significant to find which assets may be affected and to what extent they are subject to risks. Again, there are numerous assets, such as people, property, supply chain, business operations, systems and equipment, reputation, and confidence (MITRE par. 5). Human resources will become a matter of greatest concern (Leveson 30). Other priorities should be determined by the opportunities to restore assets and approximate expenditures.
Apart from ranking its assets, a company should also estimate the level of its vulnerability. In other words, the importance of an asset does not imply its extreme vulnerability (Rupert par. 20). Consequently, the task of great significance is to explore the strengths and weaknesses of each asset and find out which of them is crucial. This analysis also helps to recognize future solutions and make recommendations.
Taking into consideration the components mentioned above, one can assume the impacts connected with risks and assets. Casualties, property damage, loss of clients and partners, financial obstacles, fines and penalties, and lawsuits are some of the common impacts (Department of Homeland Security par. 8). When possible impacts are identified, one can use them as constituents of a certain situation because outcomes usually cover more than one asset.
In sum, it is possible to state that risk assessment strategies are vital because any business has to deal with hazards. One can argue that there are several elements of assessment strategies, namely hazard identification, possibility and magnitude, assets at risk, vulnerability, and impacts that largely depend on each other. Their connection is linear: having registered the relevant hazards, it is important to evaluate their probability and magnitude because they directly influence assets. According to the vulnerability of assets, the impacts may be different. Thus, all the elements are linked, and a good risk assessment strategy addresses all of them.
Curtis, Patchin, and Mark Carey. Risk Assessment in Practice. 2012. Web.
Leveson, Nancy. “A Systems Approach to Risk Management through Leading Safety Indicators.” Reliability Engineering & System Safety 136.1 (2015): 17-34. Print.
MITRE. Risk Mitigation Planning, Implementation, and Progress Monitoring. n.d. Web.
Rampini, Adriano, Amir Sufi, and S. Viswanathan. “Dynamic Risk Management.” Journal of Financial Economics 111.2 (2014): 271-296. Print.
Rupert, Jacque. The Relationship between the Business Impact Analysis and Risk Assessment. 2013. Web.
The Department of Homeland Security. Risk Assessment. n.d. Web.