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The rapid rise of technologies along with the introduction of new methods to perform diverse activities resulted in drastic alterations in the functioning of organizations and social institutions. These changes promoted the enhanced sophistication of the modern world and working environment. In its turn, it gave rise to multiple challenges and issues that might emerge during the functioning of companies. For this reason, practices that might help in determining, assessing, evaluating, and responding to unexpected critical situations acquire the top priority. Risk assessment encompasses all these activities with the primary aim to guarantee the stable functioning of numerous organizations and their further growth by determining and eliminating factors that might result in collapse or failure.
The need for the potent tool to ensure the stable functioning preconditioned a wide scope of risk assessment applications. At the moment, it is used in different spheres of human activity, starting from business and ending with healthcare. Thus. It can be defined as a set of practices utilized for the identification, evaluation, and estimation of existing levels of risk peculiar to different situations that emerge during the functioning of organizations, their investigation regarding the accepted standards, and determination of the appropriate level of risk (Ostrom and Wilhelmsen 23). Depending on settings peculiar to different organizations, specialists might apply diverse risk assessment models to ensure the most comprehensive analysis of the situation and selection of the most appropriate way to respond to it.
Risk Assessment Models
Quantitative risk assessment methods are one of the existing approaches. They are used to assess and justify the cost of implementing particular measures to a project and calculate outcomes that can be expected regarding the current state of an organization (Ostrom and Wilhelmsen 54). In general, the given method includes the in-depth investigation of the functioning to establish the rate of occurrence peculiar to different accidents (Ostrom and Wilhelmsen 54). It helps to avoid extra losses and spending by introducing measures that can be utilized to eliminate problematic concerns. The given method is used in multiple industries and fields to establish damage caused by unexpected events (Ostrom and Wilhelmsen 54). At the same time, it can be applied to formulate criteria needed for the implementation of a new solution or technology.
Dynamic risk assessment is another practice that is used by organizations. It implies the idea that if certain situations and hazards that emerge during units functioning are predictable, there should be a specific set of practices needed to respond to these accidents and minimize their negative impact on outcomes (Ostrom and Wilhelmsen 34). Under these conditions, the central aim of the dynamic risk assessment is the evaluation of different organizations development with the central aim to reveal all threats that might emerge in dynamics. Additionally, it recommends trained employees responses to increase the level of preparedness and ensure the use of the most efficient solution concerning the existing complex situation or other challenges.
Risk assessment models might also include so-called what-if analysis. It can be considered regarding the dynamic model and is focused on the determination of factors that might emerge. In other words, asking what-if questions, specialists discover problematic aspects appearing if things go wrong or evolve not in accordance with the planned scenario (Frohnoefer 87). The application of this risk assessment model demands high levels of competence from specialists working in the sphere and extensive knowledge about operations, processes, and areas exposed to hazardous events and conditions (Frohnoefer 87). Asking what-if questions, a team of specialists can brainstorm a particularly problematic situation and analyze conditions that facilitated its rise and development to select the most appropriate response to it.
Specialists engaged in risk assessment activities might also adhere to the model that presupposes the use of checklists to identify hazards and threats. The given type of analysis relies on the idea that every sphere or industry has a set of problematic issues traditionally associated with it (Frohnoefer 65). In other words, utilizing checklists, a specialist can evaluate the functioning of a unit to ensure the lack of drawbacks and minimize the probability of the emergence of diverse risk factors (Ostrom and Wilhelmsen 87). However, the given risk assessment model significantly depends on the quality of the checklist used during risk evaluation procedures and the experience of a user who is responsible for outcomes.
Hazard and operability study (HAZOP) is another risk assessment model used to identify existing threats that might emerge during the functioning of a particular organization. It can be defined as a structured and systematic examination of diverse processes or activities with the primary aim to identify and evaluate factors that might represent risks to the further evolution of a unit, its stable functioning, personnel, equipment, or outcomes (Ostrom and Wilhelmsen 98). The given study is conducted by a qualified interdisciplinary team during a series of meetings devoted to different aspects of an organizations functioning. Comparing all gathered data to the existing standards, the mean might reveal the most hazardous areas and suggest an action plan to minimize the negative impact or avoid undesired outcomes.
Finally, a fault tree analysis (FTA) can also be considered one of the risk assessment models that are utilized by specialists to determine all potentially hazardous issues and reduce the probability of their occurrence. FTA is a top-down deductive failure analysis focused on the in-depth and comprehensive evaluation of an undesired state (Ostrom and Wilhelmsen 109). This approach considers the appearance of any problem as a chain of lower-level events facilitating the rise of an unexpected outcome. For this reason, FTA is used to analyze all meaningful aspects of units functioning to determine their probability to precondition critical failures or trigger the development of a problematic situation. In other words, every possible cause of a hazardous event is identified and assessed in terms of this risk assessment model.
Risk Management Circle
Are risk identification, analysis, evaluation, and suggestion of the most appropriate solution to ensure the stable functioning of an organization and its further development (Popov et al. 67). In such a way, there is a particular risk management circle (see Figure 1) that is central to improved risk assessment practices and final success. Every stage of this circle is critical to better outcomes as it suggests a set of activities for a better understanding of a particular problematic factor.
Identification of risks is the first aspect of risk management. It includes all practices that are used by specialists to investigate the work of different organizations and reveal factors that might precondition its collapse or significant deterioration of its functioning. The given stage plays a critical role in risk assessment as the correct identification of all problematic concerns, and their description is the key to their further comprehensive analysis and evaluation during other stages (Popov et al. 68). Additionally, if a specialist misses some problematic issue, it might facilitate the development of new factors that will deteriorate the functioning of a company or an organization and even result in its collapse.
Risk analysis is the second element of the circle. The given stage is devoted to the comprehensive investigation of the nature of all hazards revealed during the previous phase. Specialists or a specific team delve into the central factors responsible for the emergence and development of unexpected situations to understand how they can be avoided in the future and what course of action can be suggested to reduce the probability of negative outcomes (Popov et al. 70). Additionally, analyzing risks, an interdisciplinary team can also delve into other smaller factors that are important for the functioning of an organization and its evolution. The given stage creates the basis for the improved evaluation of risks and their efficient problem-solving techniques.
Evaluation is the third aspect peculiar to any risk management circle. It is characterized by the use of multiple techniques to determine the potential harm the identified and analyzed problematic factors might cause to a company. Additionally, during the evaluation stage, potential costs of suggested solutions and losses are compared to select the most appropriate option and guarantee positive outcomes. The evaluation stage is also critical for the improved understanding of the mechanisms preconditioning the emergence of particular risks and the further reduction of the frequency of their occurrence (Popov et al. 71). In such a way, the given aspect plays a significant role in the risk management circle and cannot be omitted.
Finally, during a solution stage, the most efficient option to eliminate the outlined problematic factors is selected, and the ways to implement them are discussed. The efficiency of risk management and assessment practices come not only from their contribution to the identification of all existing threats but also from the ability to give recommendations regarding the utilization of outlined solutions and their realization in real-life conditions (Popov et al. 74). For this reason, the final stage of risk management plays a critical role in the process as it helps to eliminate one problematic factor and focus on the investigation of another one regarding the existing circle. All suggested solutions result from the information acquired during the identification, analysis, and evaluation phases. It means that all elements of the system are interconnected and form a complex system needed to guarantee the stable functioning of companies.
Altogether, risk assessment is a set of practices aimed at the identification, analysis, evaluation, and solution of problematic issues that continuously appear during the functioning of different companies or organizations. The sophistication of the modern environment and the emergence of multiple factors affecting the work of numerous units give rise to the need for a potent tool that can be utilized to ensure the elimination of all hazards and implementation of appropriate solutions. Regarding the nature of the problem and causes that preconditioned its rise, multiple models of risk assessment can be used. However, there is a universal risk management circle consisting of four elements such as identification, analysis, evaluation, and solution needed to guarantee an effective response to all threats and minimize their negative impact.
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Frohnoefer, Ray. Risk Assessment Framework Implementation. PPC Group, 2014.
Ostrom, Lee, and Cheryl Wilhelmsen. Risk Assessment: Tools, Techniques, and Their Applications. Wiley, 2012.
Popov, Georgi, et al. Risk Assessment: A Practical Guide to Assessing Operational Risks. Wiley, 2016.