Table of Contents

In life, no matter what role you play, sometimes you have to make decisions that are not without risk. Risk consists of two parts: the possibility of errors and mistakes and the negative consequences of this error. Read more about how to use risk assessment and control tools to identify and manage risks promptly.

What does risk analysis mean?

Risk analysis is a process that helps you identify and control problems that may arise in the future that weaken your large projects and businesses. To do this, you must first identify the threats that may be coming your way, then assess the likelihood that these threats will occur.

Risk analysis can be a very complex task because you have to look at all the details of your work, including detailed project information, financial data, security protocols, marketing forecasts, and other relevant information, one at a time. Because this tool can save you time, money, and credit, using it is a necessary step.

When to use this tool?

Risk analysis is useful in many cases:

  • When you are planning for your projects. In this case, you will be able to prevent possible concerns.
  • When you want to decide whether to continue a project or not.
  • When you want to improve your job security, and you are managing potential risks in the workplace.
  • When you are preparing for events and problems such as breakdown of machinery and equipment, theft, staff illness, or natural disasters.
  • When you are planning to deal with changes such as the entry of new competitors into the market or changes in government policies in the workplace.

How to use risk analysis?

risk assessment

Follow these steps to evaluate the risks involved:

1. Identify threats.

The first step in risk analysis is to identify potential threats or inventory that you may encounter. These threats can have different sources. For example:

Human: Illness, death, bodily injury, or other significant bodily harm to individuals

Performance: Poor procurement and performance, less access to essential resources, or failure in the distribution sector

Credit: Losing customers and employees’ self-esteem or damaging your credit in the market

Process: Inability to take responsibility, problems with internal systems, controls, or fraud

Projects: Excessive spending on a budget, excessive length of work, problems in the quality of products and services

Financial: Business failure, stock market fluctuations, interest rate fluctuations, unavailability of financial aid subsidies

Technical: increasing advances in technology, inability to use it

Natural: Climate, natural disasters, infectious diseases

Politics: changes in taxes, public opinion, government policies, or foreign influence

Hazardous chemicals, poor lighting, falling boxes, or any conditions that could damage employees or products.

You can also use different approaches to advance this analysis:

  • Make a list like the one above and see which one threatens you.
  • Look at the systems, processes, and structures you use, and evaluate the risk that each may entail. What weakness and harm from them threaten you?
  • Listen to the different perspectives of others. If you are leading a team, ask your people for their opinions on how they perform better, and consult with other people in the organization or those who are pursuing similar projects.

2. Estimate the risk

Once you have identified the potential risks you face, you should weigh the likelihood of them occurring and be aware of the potential impact and damage they can have on you.

One way is to estimate the probability of the risk occurring and multiply it by the cost that the risk will occur to you. This formula gives you the real cost of risk:

Cost of occurrence of risk × probability of occurrence of it = cost of risk

As a simple example, imagine that you have identified a risk that will increase the cost of your rent. 80% This is likely to happen next year, as your landlord has increased the cost of renting others. If this happens, your company will have to incur an additional cost of fifty million dollars next year. Thus, the risk cost of increasing the rent is:

0.80 (probability of occurrence of risk) × $500,000,000 (cost of occurrence of risk) = $400,000,000T(cost of risk)

Do not skip this step. Get as much information as you can and accurately estimate the likelihood of the risk and the costs involved. If you do not have the right forecasting tools, you can get information from previous years’ data.

How to manage risk?

risk analysis

Once you have identified the costs of potential risks, you can look at ways to manage them.

Try to take more economical approaches, because it does not make sense at all if the costs of prevention are greater than the costs of threats. In this case, it is even better to take the risk to use more of your resources to eliminate it. Be careful how you use these tools, especially when it comes to ethics or personal safety.

Avoid risk

In some cases, you may need to avoid risk altogether. This can mean not getting involved in a new business, exchanging projects, and giving up a risky activity. But this can only be done when the risks of a project do not jeopardize your organization’s interests, or those risks are not worth the cost. But keep in mind that by ignoring the potential risks, you will also miss out on an opportunity. What happens to the analysis if…? Use to evaluate options when making decisions.

Share the risk with others

You can share the risks and then share the profits from a project with another person, organization, or third party. For example, you can share your risk with the insurance company through third-party insurance for your company building and warehouse, or you can partner with another organization to produce a joint product.

Take the risk

Your last resort is to take risks. This option is on the table when you have no way to avoid or mitigate the risk, the potential loss cost is less than the cost of insuring the company or the potential gain in doing the work is worth the risk. For example, you may take the risk of starting a project late, simply because the profit of that project covers the initial costs.

Risk control

If you are going to take a risk, it is better to take steps to reduce its negative effects.

Business trials are successful ways to reduce risk. Using them, we can perform high-risk activities on a small, controlled scale and find out where potential problems arise, then we can find and implement appropriate preventive and inspection measures before starting the activity on a large scale.

Preventive measures are related to preventing the occurrence of high-risk situations, which include training in security and health, firewall protection, corporate servers, and cross-training of your team.

Inspection measures include identifying points in the process that can cause concerns and errors. To prevent this from happening, steps are taken to resolve these issues (if any). Measures such as reviewing financial statements, pre-product safety tests, or installing sensors to identify defective products.

Execution-action-review-approval is one of the common methods to control the impact of risk conditions. Like business trials, this method tests a variety of ways to reduce potential risks. This 4-step tool helps you minimize potential hazards by analyzing the situation, presenting and testing a solution, examining how it works, and ultimately implementing it.

Disaster risk assessment

A qualitative or quantitative approach to determine the nature and extent of disaster risk by analyzing potential hazards and evaluating existing conditions of exposure and vulnerability that together could harm people, property, services, livelihoods, and the environment on which they depend.

Annotation: Disaster risk assessments include: the identification of hazards; a review of the technical characteristics of hazards such as their location, intensity, frequency, and probability; the analysis of exposure and vulnerability, including the physical, social, health, environmental, and economic dimensions; and the evaluation of the effectiveness of prevailing and alternative coping capacities with respect to likely risk scenarios.

didaster reduction

Disaster mitigation

The element of risk assessment and management plays a key role in reducing disasters. Risk management is the identification, assessment, and prioritization of risks, which will result in the least amount of damage and the longest time to prevent disasters. The overall purpose of risk assessment is to provide a basis for deciding between two options: accepting the current situation and its risks or deciding to improve the existing safety situation. Also, the other purpose of risk assessment is to differentiate between important risks and risks. Is less significant. Most safety analyzes are based on disasters that have resulted in personal injury. However, an unintended event can take the form of damage to the environment or cessation of production. Therefore, in the analysis of a system, evaluation methods that can have conditions that negatively affect the functioning of individuals are preferred. Effective events are presented below.

Determining potential harmful factors, assessing the effects of harmful factors on humans, capital, and the environment, recording potential harmful factors, goals and implementation criteria, risk reduction measures, and risk assessment in order to reduce disasters in a project should include fire and explosion issues, shocks Investigations and disasters, drowning, suffocation and electric shock, acute or chronic contact with physical, chemical and biological factors and ergonomic factors should be investigated.

Presents the conceptual framework of the holistic risk approach, used for this initiative, where it is shown that risk is a function of hazard and vulnerability (physical vulnerability and socioeconomic factors). The holistic approach states that reducing the existing risk or preventing the generation of new risk it is 3 required a comprehensive risk management system, based on an institutional structure accompanied by the implementation of policies and strategies to intervene not only susceptible elements but also diverse factors of the society that may create or increase risk, as well as to intervene, when possible, created hazards (anthropogenic, technological, etc.). In the same way, in the case, a hazardous event is materialized, resulting in a disaster, emergency response and recovery actions should be conducted as part of the risk management framework.

Above Conceptual framework of the holistic approach to disaster risk. Adapted from Cardona & Barbat (2000). For this evaluation, physical vulnerability values were obtained using vulnerability functions of the exposed assets of countries. The physical component of risk was estimated using the probabilistic results
from the Global Risk Assessment 2015 (Cardona et al. 2015). The multi-hazard physical risk was expressed in terms of the Average Annual Loss (AAL) for the different perils. For the aggravating factors, fourteen variables were chosen, considering not only that they capture relevant conditions of society, but also the
coverage of countries and the confidence in the source of information


Risk analysis is a proven way of identifying and measuring factors that can negatively affect the success of a project or business. These analyses enable you to identify potential risks that threaten you and your organization and to determine if you can implement the decision ahead.

Once you have weighed the value of the risk you are about to face, you can control the different ways it is managed. Risk management can be the decision to avoid risk, share it, or accept the risk along with reducing the negative effects. It is very important that you thoroughly assess the issues when analyzing the risk and be aware of all the consequences. This awareness includes, in particular, awareness of costs, ethics, and security.

Website | + posts

Professor Siavosh Kaviani was born in 1961 in Tehran. He had a professorship. He holds a Ph.D. in Software Engineering from the QL University of Software Development Methodology and an honorary Ph.D. from the University of Chelsea.

KSRA Scientific Research Association | Website | + posts

KSRA research association of Empowerment is a global non-profit organization committed to bringing empowerment through education by utilizing innovative mobile technology and educational research from experts and scientists. KSRA research association emerged in 2012 as a catalytic force to reach the hard-to-reach populations worldwide through mobile learning.

The KSRA research association team partners with local under-served communities around the world to improve the access to and quality of knowledge based on education, amplify and augment learning programs where they exist, and create new opportunities for e-learning where traditional education systems are lacking or non-existent

Website | + posts

As a senior Environmental Expert, I am involved in managing and reducing waste and minimizing pollution in order to protect, restore and preserve the planet

I’ll use my background in science and engineering to provide a healthy environment for the world’s population by disposing of waste, providing safe drinking water, controlling environmental hazards, improving recycling, and decreasing soil, water, and air pollution.

Depending on the employer, I may be known under the alternative title of:

geo-environmental engineer
safety and environmental engineer
sustainability engineer
civil environmental engineer
public health engineer.

+ posts

More than 15 years of relevant practical and professional in Europe, the SADC region & the U. K. with management, administration, planning, coordinating, quality assurance & control technical/environmental studies, surveys, designs, Preparation of specifications, and contract administration of European Development Funds (EDF), World Bank, DANIDA, BADEA, AfDB funded projects and FIDIC Conditions of contract. , specifications, tender documentation, construction supervision, and contract administration and resolution of construction disputes, financial control, training, maintenance management, Construction Dispute Adjudication, Arbitration, and Mediation.