Risk Analysis

Managerial Economics
  A risk is a situation that can
either have huge benefits or
What is a cause serious damage to a
small business’s financial
risk health. Sometimes a risk can
analysis in result in the closure of a
business? business.
 Before taking risks at your
business, you should conduct a
risk analysis.
   Risks is connected in any investments.
 Business risks come in many shapes
and forms and can come from both
internal and external sources.
 Externally, there are political issues,
interest and exchange rates, new
Introduction market competitors, and financial risks
such as investments.
 Internal risks include workplace
injuries, non-compliance, information
breaches, loss of funds through theft
and many other unexpected events.
  It is the process of identifying and
analyzing potential issues that
could negatively impact key
business initiatives or projects.

.
Risk analysis
   This technique also helps to define
Risk analysis preventive measures to reduce the
probability of these factors from
occurring and identify countermeasures
to successfully deal with these
constraints when they develop to avert
possible negative effects on the
competitiveness of the company.
  considering the possibility of
adverse events caused by either
natural processes, like severe
storms, earthquakes or floods, or
adverse events caused by malicious
Performing a or inadvertent human activities..
risk analysis
includes  An important part of risk analysis is
identifying the potential for harm
from these events, as well as 
the likelihood that will occur
 anticipate and reduce the effect of
harmful results from adverse
events;

Enterprises and
other
organizations use
risk analysis to: evaluate whether the potential risks
of a project are balanced by its
benefits to aid in the decision
process when evaluating whether to
move forward with the project;
 plan responses for technology or
equipment failure or loss from
adverse events, both natural and
human-caused; and
Enterprises and
other identify the impact of and prepare
organizations use for changes in the enterprise
risk analysis to: environment, including the
likelihood of new competitors
entering the market or changes to
government regulatory policy.
 Before taking risks to business,
you should conduct a risk
analysis.

 A risk assessment for small

business is a strategy that measures
the potential outcomes of a risk. The
assessment helps to make smart
business decisions and avoid
financial issues.
  identify, rate and compare the
overall impact of risks to the
organization, in terms of both
financial and organizational impacts;
Risk analysis
results to an
organization  identify gaps in security and
can help to: determine the next steps to
eliminate the weaknesses and
strengthen security;
  enhance communication and
decision-making processes as
they relate to information security;
Risk analysis
results to an  improve security policies and
organization procedures and develop cost-effective
can help to: methods for implementing these
information security policies and
procedures;
  put security controls in place to
mitigate the most important risks;
Risk analysis
results to an  increase employee awareness about
organization security measures and risks by
can help to: highlighting best practices during
the risk analysis process; and
  understand the financial impacts of
potential security risks.

Risk analysis
results to an
organization  .

can help to:

 risk analysis is an
important tool for
managing costs
  associated with risks,
as well as for aiding an
organization's decision-
making process.
 Step 1: Identify risks
 Consider the damage a risk could
How to do a have on your business. Then,
risk think about your goals and the
assessment? rewards that could come out of
taking the risk. Depending on your
business, location, and industry,
risks will vary.
 Step 2: Document risks

 Once you have a list of potential

business risks, define them in a
How to do a
document. Develop a process to
risk
weigh the effect of each risk. Look
assessment?
at how much damage the risk
could potentially cause and how
hard it would be to recover. Set up
a scoring system for risks, from
mild to severe.
 Step 3: Appoint monitors

 Identify individuals at your

business who will keep an eye on
How to do a
and manage risks. The risk
risk
monitor might be you, a partner,
assessment?
or an employee. Decide how risks
should be reported and handled.
When you have procedures for 
risk management, issues can be
taken care of smoothly.
 Step 4: Determine controls
 After understanding potential risks,
figure out controls you can use to
How to do a reduce them. Look at patterns over
risk time to predict your income cycle.
assessment? And, assess the impact risks have
on your business. Look at the
significance of a risk as well as its
likelihood of occurring at your
business.
 Step 5: Review periodically
 Your business risk assessment is
How to do a not a one-time commitment.
risk Review risk management
assessment? processes annually to see how
you handle risks. Also, look out
for new risks that might not have
been relevant in the previous
assessment.
 Use a risk ratio to gauge risk
A risk ratio shows the relationship
between your business’s debts
and equity. Business debt creates
risk. By comparing debt, or
.
leverage, to equity, you get a better
understanding of your business’s
level of risk. This can help you set
more targeted 
business debt management goals.
 Debt-to-equity ratio
There are different kinds of
financial leverage ratios. One
common leverage ratio formula is
. the debt-to-equity ratio. For this
ratio, divide your total debt by
your total equity. 
Business equity is equal to your
assets minus liabilities and shows
your ownership in the business.
  For example, you have P300,000
in debt and P150,000 in equity.
 P300,000 / P150,000 = 2 times or
Debt-to-Equity
200%
Ratio = Total
Debt / Total  This means for every peso you
Equity have, you owe two pesos to
creditors.
  By finding the debt-to-equity
ratio, you can see how much

!!!
capital comes from debt. The
more debt you have compared
to equity, the bigger your risk
level.
  Are very important as they form
an integral part on an
occupational health and safety of
management plan. They help to:
Risk Create awareness of hazard and
Assessment risk. Identify who may be at risk
( eg. Employees, cleaners,
visitors, contractors, the public,
etc.)
  Firstly, you need to properly
identify the full gamete of risks
that could impact your business.

How to calculate
business risk using a  Then gathering and compiling all
Risk Assessment the necessary information
Matrix requires time and resources. But
arguably the most important step
of all is calculating the level of
risk by creating a Risk
Assessment Matrix.
  is a calculated number (score)
that reflects the severity of a
risk due to some factors.

Risk Scores
 For qualitative risk
assessment, risk scores are
normally calculated using
factors based on ranges  in
probability and impact.
 Risk probability characterizes the
chance that a certain event may
occur during the course of a
project.
Risk  For example probability could be
Probability categorized into 5 levels: Very
Ranges Low, Low, Medium, High, or Very
High.
 Some methods attempt to improve this
by using categories such as  Rare,
Unlikely, Possible, Probable and Certain
 Risk
Probability
Ranges
 RISK IMPACTS
These are referred to as risk categories
and can be assessed independently.

Risk
Impact Ranges
  assign a value to each of the 
probability and impact levels (e.g. 1, 2,
3, 4, 5). Our matrix now includes these
values for each label

Calculating
Risk Scores
Risk Scores
with Multiple
Impacts
Risk Scores
with Multiple
Impacts
  inputs for the  analysis are not ranges
or labels of ranges, but  can be
expressed in numerous ways::

Calculation Risk
Scores Based on
Results of
Quantitative
Analysis
 Risk is an inherent component of
operation of the business.
You need to protect your business
Importance and your assists.
of Risk Identify and evaluate your risk
Analysis allows you to risk by planning
ahead.
Allows you to determine the risk
you can cover & risk need to insure.