Risk Analysis

Business Analyst Techniques #2 Risk Analysis

Risk AnalysisRisk analysis or risk assessment is done to determine if the proposed project carries more risk than the organization is willing to bear. It helps in adjusting the cost and profit projections on the basis of the risks identified at any point. No project comes without risk and it’s totally unrealistic to think otherwise. The analysis activities to prepare the business case are incomplete until an initial risk assessment is performed. Project risk is defined as an uncertain event or condition which has impact at least on time, cost, scope or quality. Risk analysis includes the following processes:

  • Risk Identification
  • Risk Assessment
  • Risk Response Planning
  • Organizational Readiness Assessment
  • Risk Avoidance
  • Risk Rating

Risk Identification: The cause of risk should be described with its impact. The goal is to identify business, financial, technical and operational risks. The first thing we must do in risk identification is to recognize the areas of the project where the risks can occur. It basically includes scope of the project, cost and schedule decided for the project, change in customer requirements and resource management.

Risk AssessmentRisk Assessment: Risk assessment is done to identify the probability of occurrence of each identified risk. It consists of an objective evaluation of risk under which uncertainties and assumptions are clearly described. Business Analyst has been assigned with the task to arrive at a consensus, may be percentage, for each risk item identified.

Risk Response Planning: It is done to come up with plans to face threats which can reduce the likelihood of the success of the project. The planning is done in such a way that the risk can be mitigated(or optimization), transferred(or outsourcing), avoided (or eliminate) and accepted (mainly included with the economic forecast, e.g. natural calamities). Business Analyst along with the project manager is given the responsibility to decide the conditions for which the strategies will need to be used.

Organizational Readiness Assessment: It includes the assessment on the readiness and capacity for the changes in the organization which can be brought in by the proposed project e.g. change in the team structure while the project is under development.The cost in terms of training, new resource acquisition, retooling could be considered and business analyst has to consider these costs as well in the economic forecast.

Avoid the RiskRisk Avoidance: This includes not performing any activity which can cause risk. It is the cost of being idle during the occurrence of the risk and doing nothing to take advantage of the new opportunity. Risk avoidance can give hazardous results if utilized extensively, hence is considered as an unsatisfactory approach to dealing with many risks.

Risk Rating: Calculate an overall risk rating for the proposed projects in terms of the costs, time and solution quality. The business analyst facilitates a discussion to determine the risk in the proposed project. Each identified risk should be rated before making necessary arrangements to rectify the same, it would help in generating risk log for future prospects.

I hope this post will help the aspiring Business Analysts in considering risks while doing the Enterprise or Strategy Analysis.

Happy Learning!!!

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