Risk mitigation- How do you estimate the Impact on Business Operations
Business Impact Analysis and Business Risk Assessment—Two Crucial Steps
Business Impact Analysis (BIA) is the systematic method of determining and evaluating the possible impacts of any interruption on vital business operations caused by an accident or disaster. It is one eminent component of business continuance plan of an organization. The process of establishing actions and options in order to increase opportunities and reduce dangers to business aims is known as Business Risk Mitigation Planning.
How Risk Mitigation Attains the Vital Spot
Risk assessment is a step in business that identifies potential threats such as an earthquake, fire, cyber attack, and other such hazards. It also helps in evaluating the probable vulnerability areas, in case such a hazard does happen. In business, property, people, technology, supply chain, reputation and commitment obligations are considered the assets that are at risk. Mitigation strategy helps in substantially reducing the possibility of any threat or hazard to have a bad impact on the business operations.
What makes Impact of Risk on Business Operations Count?
Risk management being the complex area in business, it becomes inevitable for every entrepreneur to adopt the appropriate methods and strategies to assess the various risks involved in business, to be able to meet the challenges and run the business successfully. Getting a clear picture on what the risks are helps attend to them and develop remedies.
Among the different types of risks in business, namely, Strategic Risk, Compliance Risk, Financial Risk, Reputation Risk, and so on, Operational Risks are considered vital because they pose serious threat of crippling the various business operations, if left unattended.
Operational Risk Estimation
Business Operational Risks and their impact can be estimated by checking certain crucial factors that are invariably involved in the business’ day-to-day activities. A few of such factors are listed below:
The reliability of the technology and systems used in the business and frequency of their failure
What are the conceivable hazards or threats that could possibly affect your type of business
The result of a particular hazard occurring, and its impact—how long will it affect, and how it will cause damage, to what extent
Availability of control measures for facing such situations—is the organization prepared for such an eventuality?
Where could the potential threat originate—is it abuse or scam-caused, or is it due to error on the part of human resources
Is there a threat from loss of any vital employee in the organization
Now that the key factors have been identified, the next step is to estimate the extent of the threat on your business—how and in what way is it going to affect your business. Is it going to be an inconvenience or is it lethal for the survival of business? This can be analyzed using a five-point scale mentioned below:
By analyzing the various risk factors and creating a Risk Scorecard for the specific risks, business owners can skillfully manage their business risks.