Successful risk management begins once an organization follows best practices. Reduce the impact of risks, even unforeseen risks, when your organization adopts effective risk management strategies that emphasize the underlying practices experts follow.
The leading business risks globally include cyber threats, data breaches, supply chain disruptions, natural disasters, macroeconomic developments, legislative changes, and fire hazards. The list goes on and on, but following the best practices for risk assessments will reduce the likelihood and impact.
What Is Risk Assessment?
Organizations conduct a risk assessment to identify potential risks related to hazards, assess the likelihood of them occurring, and measure the potential impact to manage risks with a designated risk management strategy. The process also ensures that assessed risks are prioritized in risk levels.
Efficient risk assessment requires an organization to follow the best practices, implement a strategic risk management strategy, update a risk register, and create a culture of safety, health, and security among employees. The first step involves identifying potential risks.
Identifying and assessing risks can take many forms before the risk management process begins. The 5-step risk assessment process includes risk identification, analysis, planning, mitigation, and monitoring. Then, apply an ultimate list of best practices to ensure success and compliance.
14 Risk Assessment Process Best Practices
Discover our comprehensive list of best practices for a successful risk assessment, which will in turn help organizations with informed decision-making for the risk management processes. Managing risk is about accurately identifying, reporting, managing, monitoring, and mitigating potential risks.
Here’s how organizations can reduce emerging risks with more than five best practices:
1. Involve Stakeholders
Risk identification is a shared responsibility among decision-makers. Involving stakeholders to identify risks for the risk register, manage risks, and develop strategies together ensures the entire team speaks a common language for decision-making and aims for the same regulatory or business goals.
2. Establish a Strong Risk Culture
Business continuity requires a solid risk culture among employees, management, and stakeholders. One of the core best practices is to establish a culture of health, safety, and security among team members to ensure risk identification and mitigation can survive a lack of knowledge.
3. Promote Active Collaboration and Communication
Another one of the best practices is to establish active collaboration and communication, whether identifying business risks, operational risks, security risks, or evolving risks. Seamless communication during risk monitoring is another essential practice to streamline decision-making and risk reduction.
4. Outline a Well-Defined Risk Assessment Process
The first step involves identifying risks, but outlining the entire project scope with the analysis techniques your organization will use to achieve objectives is an integral part of the best practices. Define the entire risk assessment process, including how you’ll prioritize risks and eliminate new risks.
Please read about the benefits of going digital with risk assessments, showing how it can help organizations improve the risk assessment process through digital transformation. A well-defined risk assessment helps to identify potential threats and record key risks in a risk register.
5. Leverage Multiple Risk Analysis Techniques
Another one of the best practices is to analyze potential threats using multiple qualitative risk analysis techniques. The what-if and scenario analysis methods are ideal for hypothetical assessments, whereas the risk assessment matrix and the failure mode and effects analysis (FMEA) work for identified risks.
A technology organization with high-level security and data risks can further analyze complex systems using a fault tree analysis, hazard, and operability (HAZOP) analysis, or the FMEA technique. Consider Environmental, Health, and Safety (EHS) software to digitize and streamline complex risk assessments.
6. Use Qualitative and Quantitative Risk Analysis
Another one of the best practices for risk assessments is to use qualitative and quantitative risk assessment techniques on identified risks. Firstly, the qualitative risk analysis reveals perceived values for potential risks with a risk matrix, decision tree, or bowtie diagram.
A qualitative risk analysis is essential to prioritize risks based on the likelihood and impact, resulting in a risk rating for the risk register. On the other hand, a quantitative analysis is measurable and outlines potential financial risks in greater detail but relies on data from existing risks, possibly from the register.
7. Select Effective Risk Mitigation Strategies
Risk mitigation efforts would be fruitless without the right risk management strategy. The mitigation strategies will depend on likelihood, impact severity, and risk ratings. Understanding effective mitigation strategies could result in faster responses when the time is right.
Common mitigation techniques include risk avoidance, risk acceptance, risk transference, risk monitoring, risk mitigation, risk buffering, risk sharing, and even further risk assessment using quantitative analysis once an organization has enough data to analyze.
8. Establish a Risk Management Team
The health and safety culture remains pivotal. However, establish a risk management team responsible for the identification of new risks, existing risk reduction, and taking action when unforeseen risks occur due to natural disasters or fire safety concerns arise.
Empower the management team with decision-making responsibilities, natural disaster response training, first-aid training, and a fire safety checklist to ensure they have the tools necessary to take action. A management team should also be involved in the management planning process.
9. Implement an Established Risk Management Process
Successful risk management processes require teamwork to ensure the risk management strategies are reinforced and the risk responses are carried out efficiently during a fire safety drill or risk event. Proactive risk management processes should be visible and well-documented.
Involve the management team in documenting the step-by-step risk responses to potential threats, including natural, unnatural, and emerging risks. Consider whether the identified risks to employees and operations are all documented with a well-prepared risk response plan the management team will action.
10. Establish Clear Policies and Procedures
Only the initial risk assessment requires an organization to identify and assess all potential risks. It also helps to define the risk management plan and responses. Compliance remains a key element of the standard practices to evaluate and manage risks, whether existing, new, or emerging risks.
Establish clear policies and procedures for the risk management plan, ensuring that all employees are well aware of the policies, procedures, responder roles, and responsibilities for key risks, not only the management team. For example, all employees must know how to respond to natural disasters.
11. Risk Registry Documentation and Reporting
Documenting risks in a risk register for reporting, monitoring, and reviewing purposes is integral to business processes and efficient risk management. An organization can also guarantee regulatory compliance with a risk register outlining clear policies and procedures for employees and management.
Creating a risk register with a digital platform is how an organization can implement this crucial step of the best practices for industry-compliant risk assessment documentation. Choosing risk assessment software that streamlines processes and reporting enhances effectiveness.
12. Integrate Feedback Loops for Escalation
Making management and staff responsible only works if an organization provides the tools and feedback loops to escalate hazards, risks, and compliance shortfalls. Velappity has many forms available for staff and the management team to complete. It can help teams report issues faster.
Our forms for inspections allow the personnel to report incidents, potential hazards, and near misses to management directly through a risk assessment app. Every team member can quickly assess and report identified hazards and risks to decision-makers much faster than word of mouth, even escalating issues.
13. Frequent Risk Monitoring, Updating, and Reviewing
Assessing risks and managing risks won’t count for much without frequent risk monitoring. Besides, risk assessments aren’t a once-off activity. The Occupational Safety and Health Administration (OSHA) recommends risk assessments at least once a year, doing them more often in high-risk industries.
ISACA also recommends security assessments at least every second year to remain compliant with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Payment Card Industry Data Security Standard (PCI DSS), and the General Data Protection Regulation (GDPR).
14. Use Technology for the Ultimate Effectiveness in Managing Risks
Identify, assess, manage, and mitigate risks effectively by using technology. Meanwhile, an organization can save time, reduce costs, and get more done with risk assessment and management software. Eliminate the risk of human error, ensuring compliance in every business or risk mitigation process.
Effective Risk Management Strategies
Mitigate serious consequences and financial losses by implementing one of the best types of risk management strategies in an organization to support the best practices. We shared some risk mitigation strategies earlier. Here are some risk management strategies to mitigate risks in the long run:
- Business Experiments – A strategy to run different what-if scenarios to test outcomes related to possible threats and opportunities for improved decision-making.
- Contingency Planning – Another best practice strategy to ensure companies have multiple plans in place should risk events occur in the workplace.
- Integrating Risk Buffers – A technique used to soften the blow of a risk’s impact when it occurs by having available financial and other resources in a buffer account.
- Isolating Identified Risks – IT experts engage with internal and external teams to identify flawed processes and isolate cyber threats and risks.
- Lessons Learned – A method of analyzing historical data, near misses, and incident reports to determine whether controls worked in the last management plan.
- Minimum Viable Product (MVP) Development – A strategy used by organizations to develop software or products with essential features for early user testing.
- Risk-Reward Assessment – An organization can weigh the potential setbacks and opportunities of risk before assigning resources for risk management.
- Theory Validation – A method using surveys and questionnaires to gather feedback from personnel, management, stakeholders, and even end users in product manufacturing.
Velappity – Assess and Manage Risk With One Platform
Velappity provides organizations with the tools in mobile-first software to streamline all risk assessment and mitigation processes. Our forms for inspections help clients achieve compliance by conducting the necessary inspections to make improvements, and the Velappity pricing options are flexible.
The handy client portal allows users to easily report, track, and document any risk to establish a well-defined risk management process. In fact, Velappity speeds up reporting by up to 50%. The mobile app even works offline and syncs data to the servers once assessors return to the office.
Companies require no experience to use our app. Our videos guide every step, and you can learn more about Velappity EHS management software to see how we can serve your needs. Contact us today, or start a free trial to access multiple forms, custom documents, and regulatory guidelines.
Summing Up the Best Practices for Risk Assessments
A well-prepared risk assessment following clear policies and compliance standards is a good start. An organization also needs to assess which threats are more critical for managing and monitoring an ongoing risk management strategy.
Comprehensive risk identification, shared responsibility, and a well-defined risk register can reduce the likelihood and impact of operational risks, even evolving risks. Business continuity is the ultimate goal. Contact us today to follow the best practices and streamline risk assessment processes.
Best Practices for Risk Assessment FAQs
What are the 4 common risk responses?
The four most commonly applied risk responses include risk avoidance, risk acceptance, risk mitigation, and risk transference, albeit there are more strategies. Some organizations implement risk sharing, risk reduction, and risk buffering to improve risk mitigation efforts.
What is the potential impact of failing to implement functional risk management?
Failing to implement risk management best practices could lead to financial losses, cybersecurity threats, and data breaches. It could also result in non-compliant complex systems vulnerable to new risks from potential threats and unexpected events the company never forecasted.
What are the benefits of effective risk management processes?
Proactive risk assessments and management plans enhance the effectiveness of processes, operations, and productivity. An efficient risk management strategy also has the following benefits:
- Business continuity to resume production and operations soon after disasters
- Enhanced customer data protection and industry compliance
- Every process and personnel member is safe, healthy, and secure
- The elimination of manageable hazards and the reduction of events
What are the main five best practices in risk management?
The main best practices for risk assessments include:
- Identify the threats and hazards
- Analyze hazards for risk likelihood and impact
- Plan the risk management strategy
- Mitigate existing and new risks
- Constantly monitor and update the risk register
