Risk Assessment is: Meaning, Steps, Matrix, & Examples

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Risk assessment is a process to identify potential hazards and analyze the likelihood of the hazard actually occurring.

Such identification needs to be done by all agencies, both private and public. This is because through risk assessment, we can prevent and control hazards that may occur.

The purpose of doing this risk assessment is to identify risks and prevent work accidents, so that work can be done safely.

Further, you can understand related risk assessment below along with the matrix and examples. Let's see the full discussion!

What is Risk Assessment?

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Illustration of company performance identification and analysis (Freepik)

Risk assessment is the process of identifying, assessing, and analyzing the risks associated with a particular activity. In Indonesian, risk assessment referred to as risk assessment.

In simple terms, the goal risk assessment is to identify potential hazards, evaluate their likelihood and impact.

It also aims to develop strategies to reduce or manage risks in a more effective way. 

It is important to understand that risk assessment is different from risk analysis and management. However, these three have a close and interrelated relationship.

Risk assessment It is also a procedure that must be carried out in business management practices. The goal is to protect the assets owned and the potential that can be utilized.

Most importantly, identify the potential and risk of things that could jeopardize the business. This must be done carefully and precisely.

Steps of Risk Assessment

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Illustration of activities in the process risk assessment (Freepik)

There are several steps in performing risk assessment. This step is done to identify risks and analyze them more precisely.

What's more, risk assessment is a systematic and structured process for identifying, evaluating, and managing risks related to specific activities.

Steps of risk assessment is as follows:

1. Risk identification

First, identify all potential hazards or events that could cause loss or disruption.

The goal is to explore all events that might hinder the company's goals. It usually involves gathering information in the form of observations, interviews, and using historical data.

2. Risk analysis

After the identification process is carried out, the next step is to conduct a more in-depth risk analysis. The goal is to find out what is behind the problem and its impact.

3. Risk evaluation

The results of the analysis that has been carried out previously, it is necessary to conduct an evaluation to determine the severity of the risk. 

This step can utilize a pre-determined severity and probability risk assessment matrix. 

4. Risk control

The next stage of implementation risk assessment is to develop strategies to reduce or manage the risk.

The strategy can be done by prevention to reduce the impact of the risk or problem that occurs. Risk control can include process changes, use of technology, and more.

5. Monitoring and review

After the control process is implemented, monitoring and review of the strategy that has been made previously must be carried out. 

These conditions aim to ensure that the controls implemented are effective. In addition, it is necessary to conduct regular reviews to evaluate the success of the strategy.

Risk Assessment Matrix

Risk assessment has a matrix that is used to measure and evaluate risks based on the level of risk. probability that will occur and the impact of the event.

Simply put, a risk assessment matrix is a table used to determine the level of risk. This is done by weighing the probability against the severity of the hazard.

This matrix aims to look at existing risks and help make decisions or strategies. The following is an explanation of the risk categories:

1. Extreme

The first category, namely extreme means the most important risk, so it must be addressed immediately on a high priority basis.

If this kind of risk occurs, the team on duty must act immediately. The goal is to eliminate the risk completely.

2. High

Furthermore, the category high which is also required to take immediate action. The goal is to immediately know the right way or strategy in eliminating risks.

If the problem cannot be solved immediately, then a new, stricter deadline must be set so that it can be resolved as soon as possible. 

3. Medium

If the risk category is medium means it must immediately take appropriate steps to develop its risk management strategy.

This kind of risk does not usually require extensive resources. However, they can be handled through smart thinking and logical planning.

4. Low risk

The last category is low which means the risk is still low and does not cause significant problems.

However, if there are good measures to help address these risks, they can be used to improve overall performance.

Example of Risk Assessment at Tech Company

Every job, of course, has its own risks and is different from one another. This risk can later affect the performance performed.

However, here is an example of a risk assessment in a company that you can use as a reference.

For example, companies that are engaged in technology and develop software. Here, they also need to determine risk assessment-nya.

Example of risk assessment is as follows:

1. Risk identification

  • Identify potential security vulnerabilities in the software that could be exploited by responsible parties.
  • Identify the risk of losing customer data due to system failure or attack malware 
  • Identify mental and physical health hazards of employees due to high work pressure
  • Identify potential hazards in the workplace, such as physical injuries from accidents or unhealthy environmental conditions.

2. Risk analysis

  • Assess the probability and impact of the risk occurring
  • Analyze what the background of the problem could be. For example, the exploitation of a security vulnerability is low, but the impact on the company's reputation and financial loss is significant.

3. Risk evaluation

  • Using a risk assessment matrix to place each risk in the context of severity and probability
  • Evaluate the risk of compliance with data privacy regulations

4. Risk control

  • Develop strategies to reduce or manage identified risks
  • Implement strict security procedures
  • Improve system monitoring
  • Provide safety training to employees

5. Monitoring and review

  • Periodically monitor the effectiveness of risk controls implemented
  • Conduct regular reviews to update risks as changes occur.

Well, that's the discussion about risk assessment along with steps, matrices, and examples in the company.

Basically, risk assessment is a process of identification and analysis carried out to determine the risks or hazards that may occur in an activity, especially in agencies.

One of the problems or risks that occur in an agency is the audit process. This is because it must be carried out by parties who understand in their fields, otherwise it can have a bad impact on the agency.

If your company needs help with the audit process, then trust Audithik. Because, Audithik provides Internal Audit Software for the company to realize Good Corporate Governance.

If interested in using software, please for contact us and consult all your needs for free.

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