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Risk Assessment

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Dushmantha Ranathunga
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44 views3 pages

Risk Assessment

Uploaded by

Dushmantha Ranathunga
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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IS Risk Assessment

Name :- R.A.D.K Ranathunga

1
RISK ASSESSMENT PROCEDURES
 Introduction

Risk assessment procedures are crucial tools used by organizations to identify, evaluate, and manage
potential risks that could impact their operations, assets, and objectives. By systematically analysing risks,
organizations can make informed decisions and develop effective strategies to mitigate potential negative
consequences. This report provides a comprehensive overview of risk assessment procedures, focusing on
two prominent methods:
1) Quantitative risk assessments
2) Qualitative risk assessments
 Quantitative Risk Assessments

Quantitative risk assessments involve the use of numerical data and mathematical models to assess and
quantify risks. This method utilizes measurable factors such as probabilities, frequencies, and monetary
values to evaluate the likelihood and potential impact of identified risks. Steps in conducting a
quantitative risk assessment include.

 Risk Identification: To identify potential risks and establish a comprehensive risk register. This
involves considering various sources of risk, such as operational, financial, legal, or reputational
risks.
 Data Collection: Accurate and reliable data is crucial for quantitative risk assessments. Historical
data, industry benchmarks, expert opinions, and statistical analysis are some of the sources used to
collect relevant data.
 Risk Analysis: In this step, the collected data is analysed using mathematical techniques such as
probability distributions, statistical models, and simulations. This analysis helps quantify the
likelihood of a risk occurring and estimate its potential impact.
 Risk Evaluation: The results of the risk analysis are evaluated to prioritize risks based on their
severity and potential consequences. This allows organizations to allocate resources efficiently
and focus on addressing the most significant risks.

Benefits of Quantitative Risk Assessments


 Provides a systematic and objective approach to risk assessment.
 Enables the comparison and ranking of risks based on quantifiable measures.
 Facilitates informed decision-making by considering the financial implications of risks.
 Helps allocate resources efficiently by focusing on high-priority risks.

 Qualitative Risk Assessments

2
Qualitative risk assessments focus on subjective judgments and expert opinions to evaluate risks.
Unlike quantitative assessments, qualitative assessments do not assign numerical values to risks but
instead use descriptive scales or categories to rank and prioritize risks. The key steps involved in
qualitative risk assessments are,
 Risk Identification: Similar to quantitative assessments, the first step is to identify and list
potential risks that may impact the organization.
 Risk Analysis: In this stage, risks are evaluated qualitatively based on their likelihood of
occurrence and potential impact. Instead of using numerical values, risks are typically ranked on a
scale, such as low, medium, or high.
 Risk Evaluation: The risks are assessed based on their overall qualitative assessment, taking into
account factors such as severity, urgency, and detectability. This evaluation helps prioritize risks
and determine appropriate risk management actions.
 Risk Treatment: Based on the qualitative assessment, organizations can develop risk treatment
strategies, which may involve implementing controls, creating contingency plans, or seeking
expert advice.

Benefits of Qualitative Risk Assessments:


 Conducted quickly and with limited data availability.
 Incorporates expert judgment and experience, providing valuable insights.
 Enables early identification of risks and proactive risk management.
 Suitable for assessing risks that are difficult to quantify or have subjective components.

Conclusion
Both quantitative and qualitative risk assessments play vital roles in the risk management process.
While quantitative assessments provide a more precise and data-driven approach, qualitative
assessments offer flexibility and ease of implementation. Depending on the nature of the
organization, its available resources, and the specific context of the risks, a combination of these
approaches may be used to achieve a comprehensive risk assessment. The goal of risk assessment
procedures is to enable organizations to make informed decisions, allocate resources effectively,
and implement proactive measures to mitigate potential risks and ensure long-term success.

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