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A Guide To Risk Analysis - Example Methods - SafetyCulture

The document provides a comprehensive guide to risk analysis, detailing its components, methods, and types, including qualitative and quantitative analyses. It outlines the differences between risk assessment and risk analysis, and offers examples and steps for performing various types of risk analysis, such as needs assessment and failure mode and effects analysis. Additionally, it emphasizes the importance of risk analysis in mitigating business vulnerabilities and ensuring operational efficiency.

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0% found this document useful (0 votes)
15 views14 pages

A Guide To Risk Analysis - Example Methods - SafetyCulture

The document provides a comprehensive guide to risk analysis, detailing its components, methods, and types, including qualitative and quantitative analyses. It outlines the differences between risk assessment and risk analysis, and offers examples and steps for performing various types of risk analysis, such as needs assessment and failure mode and effects analysis. Additionally, it emphasizes the importance of risk analysis in mitigating business vulnerabilities and ensuring operational efficiency.

Uploaded by

cruzshe92
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Topics Safety Risk Analysis

Risk Analysis: A
Comprehensive Guide
Everything you need to know about risk analysis: its components, types,
and methods, as well as examples and steps on how to perform risk
analysis

In this article

Published 24 Jan 2025


Article by SafetyCulture Content Team | 7 min read

What is Risk Analysis?


Risk analysis is a multi-step process aimed at mitigating the impact of
risks on business operations. Leaders from different industries use risk
analysis to ensure that all aspects of the business are protected from
potential threats. Performing regular risk analysis also minimizes the
vulnerability of the business to unexpected events.

Difference Between Risk


Assessment and Risk Analysis
Risk assessment is just one component of risk analysis. The other
components of risk analysis are risk management and risk
communication. Risk management is the proactive control and
evaluation of risks while risk communication is the exchange of
information involving risks. Unlike risk analysis, risk assessment is
primarily focused on safety and hazard identification.
Risk Analysis Framework

Risk Analysis Methods


There are two primary risk analysis methods: qualitative and
quantitative.

Qualitative risk analysis:


Easier and more convenient.
Rates risks based on perceived severity and likelihood.
Quantitative risk analysis:
Calculates risk using available data.

Qualitative analysis tools include all root cause analysis (RCA) tools
except failure mode and effects analysis, needs assessment, and risk
matrix. Common quantitative types include the 3×3, 4×4, and 5×5 risk
matrix.
Risk Assessment Matrix | SafetyCulture

Quantitative risk analysis includes types such as business impact


analysis (BIA), failure mode and effects analysis (FMEA), and risk benefit
analysis. The main distinction between qualitative and quantitative risk
analysis lies in the type of risk assessed: qualitative analysis yields
projected risk (estimates of how risks may manifest), while quantitative
analysis focuses on statistical risk (specific and verified data), often used
for calculating insurance premiums.

Types of Risk Analysis


As risk analysis covers a wide range of topics, there are many
approaches to analyzing risks or types of risk analysis. These include,
but are not limited to, the following:

Risk Benefit & Cost Benefit Analysis


A risk-benefit analysis looks at the advantages and disadvantages of
an action, helping to determine how likely it is to succeed or fail. On
the other hand, a cost-benefit analysis adds up the expected costs
and compares them to the expected benefits. Both methods help
leaders make smart choices, as taking on risky or expensive actions
can result in losses.
Needs Assessment
A needs assessment is a structured process that helps organizations
find out what they are lacking. It identifies gaps in the business and
allows leaders to understand what needs improvement. This way,
they can better use their resources to reach their goals more
effectively.
Business Impact Analysis
A business impact analysis helps companies prepare for disruptions
caused by natural disasters and other external factors. It lays the
groundwork for recovery plans and guides investments in
prevention and mitigation strategies.
Failure Mode and Effect Analysis (FMEA)
A failure mode and effects analysis is a method used to find
possible problems in business processes and reduce their impact on
customers. By identifying these issues, FMEA helps improve the
reliability of products and services while also lowering costs
associated with failures.
Root Cause Analysis
A root cause analysis aims to find and remove the main reasons
behind problems. This approach helps prevent the same issues
from happening again by addressing the weak systems that lead to
them. Besides failure mode and effects analysis, other tools used
for root cause analysis include:
5 Whys
8D
DMAIC (which is part of Six Sigma)

Risk Analysis Example


Here are risk analysis examples for three major industries: construction,
transport & logistics, and manufacturing.

Construction Risk Analysis Example: The owner of a construction


company considers a luxury resort project proposal that could boost her
company’s reputation, but hesitates due to her focus on mid-range
residential buildings. She conducts a risk-benefit analysis with her team
to evaluate the potential risks and benefits before making a decision.

Transport & Logistics Risk Analysis Example: The director of a


multinational shipping company worries about an upcoming storm’s
impact on operations and proposes setting aside recovery funds. A
colleague disagrees, believing the storm will have minimal effects. To
convince him and other directors, she conducts a business impact
analysis and presents the results at the next board meeting.

Manufacturing Risk Analysis Example: A new manager conducts a


needs assessment by surveying workers to prepare the factory for
increased summer orders, ensuring successful production of sufficient
units.

How to Perform Risk Analysis


For leaders who have already decided on the type of risk analysis to
perform, here are steps and instructions for each type:

How to Perform Needs Assessment


Step 1: Identify requirements – What must the business deliver to
succeed?
Step 2: Assess existing resources – What can be used to achieve
success?
Step 3: Identify needs – What does the business lack that is critical
to success?
Step 4: Develop a plan of action – What must be done to fill the
gaps and succeed?
Needs Assessment Template
Use this digital template to assess your business or department’s
performance and identify learning needs, providing leaders with
essential tools for effective management.

How to Perform Business Impact Analysis


Step 1: Gather information on business processes, finances, and
management.
Step 2: Identify Recovery Time Objective (RTO) or how long it takes
to restore business processes after disruption. RTO helps determine
how long the business can function without normal business
processes.
Step 3: Identify Recovery Point Objective (RPO) or the acceptable
loss to customers when a disruption occurs. RPO helps determine
the estimated financial impact on the business.
Step 4: Develop workaround procedures of the business in the
event of disruption.
Step 5: Decide business needs based on the information gathered
in previous steps.

Business Impact Analysis Template


Use this digital template to evaluate the impact of potential disruptive
events on key business functions. It assesses operational losses and
revenue, helping leaders prioritize recovery efforts during crises.

How to Perform Failure Mode and Effects


Analysis
Step 1: Identify mechanism of failure

Identify potential failure modes and causes by reviewing past failures


and establishing ground rules.

Step 2: Determine RPN


Calculate the risk priority number (RPN) based on severity,
occurrence, and detection to prioritize failures. Focus on the
top 20% of high RPNs for improvement efforts.

FMEA: RPN Risk Analysis | SafetyCulture

Leaders should focus their improvement efforts on potential failures at


the top 20% of the highest RPNs. These high-risk failure modes must be
addressed through effective action plans.

Step 3: Follow-up on actions


Continuously review and update action plans addressing high-
risk failure modes after implementation.

Failure Mode and Effects Analysis Template


Use this digital template to pinpoint issues in processes or products by
detailing the potential failure effect, cause, and current controls. Include
severity, occurrence, and detection ratings, then record the RPN and
sign off.

How to Perform Root Cause Analysis


Step 1: Define the problem
Identify observable consequences of an unidentified risk or
root cause.
Step 2: Select a tool
Use methods like:
5 Whys: Ask “why” five times; simple but may oversimplify
issues.
8D: Eight disciplines for long-term solutions; requires Get the app
extensive training.
DMAIC: Comprehensive yet easier than 8D, especially if the
analysis is simplified.
Step 3: Implement actions
Develop and execute specific actions addressing the root
causes identified.

Root Cause Analysis Template


Use this digital template to examine a recurring problem’s impact on
productivity. Identify reasons for the issue, rate their likelihood as root
causes, select a root cause category, and propose a prevention strategy.

SafetyCulture Platform for Teams

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Learn More

FAQs about Risk Analysis


What are the 4 components of risk analysis?

What is a risk analysis checklist?

What is the most commonly used technique for risk analysis?


Article by

SafetyCulture Content Team


SafetyCulture Content Team
The SafetyCulture content team is dedicated to providing high-quality,
easy-to-understand information to help readers understand complex
topics and improve workplace safety and quality. Our team of writers
have extensive experience at producing articles for different fields such
as safety, quality, health, and compliance.

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