How to Analyze Process Risk

Published On:
November 09, 2023
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Every process has inherent risks that can result in unintended consequences. Understanding the source of risks, as well as the reliability of a process, allows an organization to plan for and ideally prevent negative outcomes. In turn, risk management ultimately leads to more consistent processes.

So how do organizations manage risks? Risk and process analysis can help organizations understand what could go wrong and what to do about it. By identifying and assessing factors that may jeopardize success or undermine a strategic goal, an organization can design processes to manage those risks. 

Risk analysis is usually focused on two variables: likelihood and impact. An item that is unlikely to happen or wouldn’t be terribly disruptive may not warrant much process improvement or contingency planning. Consider the approach used by the insurance or disaster recovery industry. To assess likelihood, an actuary would weigh frequency, predictability, and forewarning variables. And to assess impact, an actuary would consider duration, consequences, necessary redundancy levels, and the potential dollar loss.

Such details help direct risk management plans. This article details how to analyze risks and processes; this information can drive the appropriate response in mitigation and contingency planning.