How to Assess Risk

Calculate the probability that a potential hazard will pose a risk to your business with these tips.

Step 1: Identify hazards Identify potential hazards by asking questions such as what could possibly go wrong; what vulnerabilities exist; and what assets must be protected.
TIP: A hazard is something that has the potential of doing harm.
Step 2: Prioritize hazards Prioritize the identified hazards with a custom numerical ranking. that reflects your assessment of the relative severity of the hazard.
Step 3: Assign scores Assign a numerical score to the probability that each hazard will occur.
TIP: Search online for a chart to help assign probability scores.
Step 4: Multiply severity by probability Multiply the severity score by the probability that each hazard will occur. The product is the risk level associated with the hazard.
Step 5: Manage risk Determine how the risk should be handled, and what management strategies are necessary to mitigate it. This depends on your appetite and tolerance for risks.
FACT: The first serious attempt to develop a statistical approach to probability appeared in the 16th century.