How can I conduct a simple yet effective Risk Analysis?

A good risk analysis will help you to decide what actions to take to minimize disruptions to the envisioned outcome.

What is risk?
The perceived extent of possible loss.
RISK = PROBABILITY OF EVENT x COST

What steps do I need to follow?
1. Identify Threats
• Human - from individuals or organizations, illness, death, etc.
• Procedural - from failures of accountability, internal systems and controls, organization, etc.
• Natural - threats from weather, natural disaster, accident, disease, etc.
• Technical - from advances in technology, technical failure, etc.
• Political - from changes in tax regimes, public opinion, government policy, foreign
influence, etc.
• Project - risks of cost over-runs, jobs taking too long, of insufficient product or service
quality, etc.
• Financial - from business failure, stock market, interest rates, unemployment, etc.
• Others

2. Estimate the likelihood
Give each risk a probability of occuring between 0.0 and 1.0.

E.g. Flooding in Central London will have a lower probability than transport delay.

3. Apply the cost of each risk
Give each risk a weighted value between 1 and 10 depending on how detrimental its occurence would be.

E.g. Failing on a proof of concept would have a greater severity than not responding to an email in a timely fashion.

4. Identify the primary risk areas
Calculate the risk of each factor by multiplying the probability by the weighting. Now list the risk areas by severity. This will give you a valuable overview of potential risk areas and allow you identify those areas that require most attention.

4. Add Mitigation Steps for each Risk Area
List the steps that needed to be followed in order to avoid the risk manifesting.

E.g. Failing on a proof of concept - prepare sufficently. Ask the right questions before hand. Give yourself enough time. Provision the required resources...

5. Add Contingency Steps for each Risk Area
List the recovery steps in the case that one of these risks do actually manifest.

E.g. Failing on a proof of concept - list the challenges that were encountered and contributed to failure. Minimise outrage by...

Risk Area	Probability	Cost Weighting	Risk Score	Mitigation	Contingency
Failing on Prototype	0.5	9	4.5	Prepare adequately beforehand Provision Necessary Resources beforehand Fully Understand the requirements Constantly communicate with evaluators	Identify and explain the contributory factors Shift focus to reference sites