How to Conduct a Risk Assessment (Tips and Definition)

Updated August 26, 2023

Performing a risk assessment contains several steps, ranging from risk identification to risk communication. While performing these assessments, or hiring someone to do so, professionals use strong analytical skills and organizational skills. When you understand the components associated with assessing risks, you can help increase overall sales and improve a company's processes. In this article, we provide a definition for these assessments, along with a guide that explains how to conduct an assessment.

What is risk assessment?

Risk assessments, also called risk management, refers to an evaluation that identifies potential risks in the workplace. These assessments identify how potential risks impact the business's ability to sell products and continue their regular processes. Assessing risks identifies who these risks harm if events occur and require strong documentation of prevention methods. They also evaluate your existing control measures and the overall effectiveness of them. Here is a list of benefits associated with risk management:

Identifies invisible risks

When conducting assessments, you frequently identify risks that are otherwise invisible or that you otherwise wouldn't notice. Professionals in this field complete comprehensive risk management to discover risks that go beyond your textbook, which is why you may find it beneficial to hire a professional who specializes in these assessments. Professionals have a significant understanding of all types of risks associated with a business and industry.

Provides insight

Risk management provides you with additional insight into the business and aims to support the Board of Directors, along with company stakeholders. Professionals who conduct risk assessments provide you with resources that help you implement changes following the assessment. This insight also helps you make informed decisions.

Encourages collaboration

Risk management encourages collaboration between departments and with professionals who conduct assessments. You may want to consider conducting these assessments before your regulatory board does. By hiring a private professional to conduct an assessment, you can make corrections before the regulatory board identifies potential issues. By showing your regulatory board that you already have measurements and procedures to accommodate potential risks, you demonstrate initiative and leadership skills.

Reduces liability

You can reduce your overall liability by conducting a risk analysis, as you may be able to prevent accidents and issues from arising. When you remove your overall liability, you also ensure the company makes a strong investment for potential investors. You may also want to use these assessments to prevent class-action lawsuits from impacting you. When you prove that you implemented prevention for potential risks, your liability decreases significantly.

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How to perform assessments for risks

Here's a guide to help you perform assessments for risk when necessary:

1. Identify risks

Risk identification requires you to address various hazards and risks within your workplace by identifying them. In this phase of the assessment, you identify threats and opportunities. For example, ladders that aren't properly stored may pose a risk to the health of the company's employees and team members. You also identify any causes, events, consequences, and limitations in knowledge. These limitations in knowledge pose a risk because employees who lack knowledge about safety procedures and various aspects of your industry can cause accidents. Teams conducting these assessments use various methods to identify hazards in the workplace.

Risk management teams also use tools like matrices and heat maps to compare your priorities to each other. These tools also allow you to prioritize your hazards and determine which are most important. You can also use documentation reviews, information gathering techniques, root cause analysis, and other methods of risk management to identify potential risks.

2. Analyze risks

Risk analysis requires you to work with the information you obtain in your risk identification by analyzing the data. In this phase of the projects, stakeholders also contribute to the risk analysis and prioritize various actions depending on various existing controls. These analyses also require a detailed analysis of uncertainties, hazards, and potential consequences. They can also include the likelihood of risks becoming events, potentially dangerous scenarios, and the effectiveness of the measurements you implement.

You may want to remember that events can occur because of several causes, and they can have multiple implications. This sometimes requires multiple programs to fix potential events and issues. During your preliminary analysis, you can also discuss the hazards identified in your previous hazard identification. Assessors analyze the current situation in your work environment to determine the potential state of a company's future. The assessor's tools, like matrices and heat maps, prioritize your hazards, so you know which ones to mitigate first. Here are some other elements involved in your risk analysis:

Risk analysis matrix

The assessment matrix refers to the visual representation of your risk analysis. The risk matrix increases the overall visibility of risks, depending on the likelihood of those risks occurring. If the matrix tells you that a risk is of high-risk, this means that there is a high probability of an event occurring that includes this risk. A high risk also informs you of the impact of those risks if they occur. Low-risk events demonstrate a low probability of an event occurring, and that potential events would have a low impact.

If a risk has a low probability but would have a significant impact on the business if it occurred, potential events may still have high risks. Risk matrices represent these risks and their probability with graphs. These matrices present the categories of the risk's severity, listing high-level risks on one end of the spectrum and low risks on the other. Assessors typically use colours to differentiate risk levels and to increase the matrices' overall visibility.

Procedure

After conducting the preliminary analysis, assessors transfer their data into detailed analyses. They may use tools like the bow-tie method to develop a diagram for the assessment. This tool provides you with a diagram that evaluates the relationship between high-risk scenarios and the elements that contribute to them.

When trying to find solutions for your assessment, you can develop a layer of protection analysis (LOPA). The layer of protection analysis identifies whether you have existing or potential barriers that reduce overall risk levels. Assessors use this tool to select hazards and their implications, along with independent layers (IPL). They also use LOA to identify IPLs for every pair of hazards and consequences. Examples of IPLs include changes to product or structure designs, along with engineering controls and warnings on devices.

3. Evaluate risks

The risk evaluation is the final step of your assessment and typically relies upon safety professionals to evaluate the overall results of your analysis. They follow up by comparing the results to the risk criteria. This allows them to determine which controls you may require, along with which type of controls you've implemented. You may use a bow-tie analysis in this phase to obtain a holistic view of your risks and to obtain a general image of potential events.

Assessors typically orient their analyses depending on potential incidents, their causes, and which controls you already implemented to prevent events from happening. The evaluation also summarizes how potential events occur and the consequences of those events if they do occur. The bow-tie method doesn't involve risk scoring mechanisms or the effectiveness of the controls you implemented.

4. Communicate risks

The fourth element of your assessment is the communication of risks. This considers the holistic context associated with your risks and identifies how both internal and external stakeholders perceive risks. Assessors and safety professionals who conduct these analyses communicate potential risks to stakeholders and members of upper management. They typically explain all terms and risks in comprehensible terms. Assessors and safety professionals also ensure that you understand all risks and the potential controls you can implement to prevent risks from causing more serious events.

The assessor or safety professional involved in your file also considers the company's goals and provides you with the resources necessary to achieve goals efficiently. When providing these resources, safety professionals also ensure you know how to implement new procedures safely. In this stage, the assessor may provide you with a tour of your facilities to show you every risk.