Risks are potential problems that may or may not occur. Risk is the probability of a negative event occurring.
So the risk is some potential negative impact with some probability of occurring. Every risk that arises has an undesirable negative consequence on the running of the organization.
- Risk = Impact * Probability
The impact and severity of the risk to the organization
The negative consequences of risks have varying weight, severity and impact on the organization. For each risk, the seriousness of its consequences must therefore be assessed and based on this, determine the priorities, which risks should be given priority attention.
- Assessing how much the risk will affect the organization's processes, how serious the consequences will be
- The severity of the impacts of a risk results from its harmful consequences and is assessed in risk analysis
Example: The impact of an internet outage is critical for an e-commerce solution provider, but only mild for a lawn care company
Probability of the risk
Each risk has some probability of occurring. This is increased or decreased by a number of circumstances, some of which can be influenced, some not.
- Every process or asset is somehow vulnerable, and higher vulnerability means higher probability
- Organizations strive to reduce the vulnerabilities of their assets and processes to reduce the likelihood that a risk will occur
Negative consequences of the risk
Once a risk occurs, it means a problem for the organization's processes or assets:
- unavailability or loss of an asset that leads to a stoppage of processes (death of a worker, power failure, loss of information, destruction of a machine, destruction of a building, theft of funds, etc.)
- damage takes the form of injury, damage to health, accidents, damage or breach of data, damage to machinery, damage to buildings and the like and results in the limitation of processes or the functioning of assets
- misuse takes the form of, for example, misuse of information, theft of sensitive information and leads to fines, loss of market position or loss of reputation
What types of risks threaten companies
Every organization faces many different types of risks in different areas
- Financial risks, lack of funds
- Risks of various frauds, especially financial ones
- Work and workplace safety risks - health, injury or death
- Cybersecurity risks, Information security risks, Information Loss or Information Disclosure
- Reputational risks of damage to the good name in the market
- Competitive and market risks of being overtaken by competition
- Legal and compliance risks of litigation
- Various operational or project risks
- See here for a more detailed description of the most common risks.
Risk sources
- Risks arise either in the processes or in the assets
- Various internal and external hazards, dangers and threats also cause risks
How to manage risks in a company
Knowing the risks that can endanger your business must belong to the basic instincts of self-preservation and to the basic elements of the management of the organization. Aptien allows you to keep an overview of your risks in a simple way, including a link to their sources, and thanks to tasks and measures, it allows you to keep risks under control.