1. It allows you to identify areas of high risk and prioritize mitigation efforts
Regularly assessing and updating a business’s risk profile is crucial to its success and resilience in the face of potential threats. By knowing the potential dangers, you start developing strategies to combat them.
2. It helps you to develop a risk management strategy
By understanding and managing risks, a business makes informed decisions to protect and grow its operations. You must constantly monitor the risk throughout the project, record its impact, and then review it afterward.
3. It determines the need for insurance or other risk mitigation techniques
To mitigate risks, you can: avoid, reduce, transfer, or accept. Avoiding risk means doing all things to ensure it never occurs. For example, hiring more people reduces the risk of staff being unable to complete tasks during a busy week.
Reducing risk means minimizing the hazard’s effects. Choosing cheaper materials for a project that would otherwise be left incomplete due to budget running out.
Transferring a risk means letting a third party catch the consequences of the hazard. Paying an insurance company or handing off a project to a contractor.
Accepting risk means just moving forward with the project as is. The stakes may be so small that they won’t have significant negative impacts.
4. It gives you confidence in your decision-making ability
You know the associated risks and how to manage them, earning you the trust of your employees. It’s easier to craft strategies, hit goals, and gather data for your following risk
5. It creates a safe working place that minimizes legal liabilities
Having your employees participate in your assessments allows them to contribute their ideas on reducing risk, especially regarding their health and safety. You can also bring in legal experts to ensure that your projects won’t cause any legal actions against your company.