Risk Evaluation Techniques

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Risk evaluation techniques are often specific to the project or business sector in which they are being carried out. However, there are common techniques that can be applied across all businesses, organizations and activities. Risk evaluations require planning, forethought and care. There are three important sections of a risk assessment: identify the risks, develop solutions and safety measures and reassess on a continual basis.

Gather data on the project or business that you want to perform a risk assessment on. No evaluation can be started without a business or organization knowing the full extent of its assets, staff, training and activity.

Produce a risk evaluation template for health and safety. Open a word document and save it as “risk evaluation.” Insert a table into the document. The number of columns depends on what criteria you need to evaluate. For example, it could include highlighting hazards, why they are hazards, what is being done to solve them and who is doing it. The number of rows depends on the number of hazards and risks you need to evaluate.

Use a balanced scorecard to evaluate risks to the overall running of the business. The balanced scorecard breaks business down into different segments, from leadership and strategic planning to market focus, process management and results. The balanced scorecard makes the business more transparent, sets clear targets for improving how the business runs and highlights its deficiencies.

Conduct a financial risk assessment using several different tools. Evaluating financial risk is a complicated business, but you can use the four main tools of asymmetry coefficient, index delta, loss probability and Value at Risk (VaR). Asymmetry coefficient demonstrates how skewed a payoff function might be in an open business portfolio. Index delta gauges the risks of a complex portfolio depending on its base assets. Loss probability estimates how likely a loss will be on a portfolio. VaR estimates the maximum possible loss on a financial portfolio.

Evaluate your rivals. A good defense is just as useful as a good offense. Offensively, you can assess yourself, your company or organization. Defensively, you can evaluate risks to your company by rivals or disgruntled ex-employees, maybe even the government. With the latter the risk might come from proposed changes to business laws or projected tax increases. Factor all these possibilities into a risk assessment.

Monitor and continually reassess or reevaluate the workings, structure and training in your business or organization. Whichever risk evaluation technique is put into practice, or if all of them are, they are worthless if they are only performed yearly or whenever trouble occurs. Keep them constant, keep them rolling and keep adapting.

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About the Author

Mark Wollacott began writing professionally in 2009. He has freelanced for "Kansai Time Out" and "Kansai Scene" magazines and he has also worked for Travelocity and the Austin Post, writing about travel, business and technology. Wollacott has a Bachelor of Arts in ancient history and archaeology from the University of Wales.

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