Identifying and classifying risk
The first stage of managing risk is to identify the risks to the business. An inventory of the risks a company faces, which is sometimes known as a risk register, is usually generated.
Even for a small company, defining, identifying and classifying a company’s risks can be a difficult task. For a large multinational the list of risks identified may seem dauntingly long. Risk identification is the most critical part of the risk management framework as any unidentified risks are effectively unmanaged.
Once a risk register has been produced it is useful to classify the risks. Risk classification is the grouping together of risks in a way that makes it easier for the business to manage them. Risks could be classified by:
- likelihood of occurrence
- cost and/or impact should they occur
- business area
- risk type.
The main purposes of risk classification are to allow consistent management of similar risks, and to delegate management of them to appropriate individuals.
Reach your personal and professional goals
Unlock access to hundreds of expert online courses and degrees from top universities and educators to gain accredited qualifications and professional CV-building certificates.
Join over 18 million learners to launch, switch or build upon your career, all at your own pace, across a wide range of topic areas.
