What are the most effective strategies for identifying and prioritizing risks to your organization?

1 Define your risk appetite

Your risk appetite is the amount and type of risk that you are willing and able to take in pursuit of your objectives. It reflects your values, culture, and vision, as well as your external and internal environment. Defining your risk appetite helps you to set boundaries and criteria for risk-taking, and to communicate them to your team, board, and other stakeholders. It also helps you to avoid taking too much or too little risk, which can compromise your performance or opportunities.

2 Identify your risk sources

Your risk sources are the factors that can cause uncertainty or variability in your outcomes. They can be internal or external, positive or negative, known or unknown, controllable or uncontrollable. Identifying your risk sources helps you to understand where your risks come from, how they affect your objectives, and how they interact with each other. You can use various methods to identify your risk sources, such as brainstorming, interviews, surveys, audits, analysis, or scenario planning.

3 Assess your risk impact and likelihood

Your risk impact is the potential consequence or effect of a risk on your objectives, and your risk likelihood is the probability or frequency of a risk occurring. Assessing your risk impact and likelihood helps you to measure and compare your risks, and to prioritize them according to their significance. You can use various tools to assess your risk impact and likelihood, such as matrices, scales, ratings, or scores.

4 Evaluate your risk response options

Your risk response options are the actions that you can take to address your risks, either by reducing their impact or likelihood, or by exploiting their potential benefits. Evaluating your risk response options helps you to choose the most appropriate and effective strategies for each risk, and to allocate your resources accordingly. You can use various criteria to evaluate your risk response options, such as cost, benefit, feasibility, acceptability, or alignment with your risk appetite.

5 Monitor and review your risk performance

Your risk performance is the outcome or result of your risk management activities, and how they contribute to your objectives. Monitoring and reviewing your risk performance helps you to track and measure your progress, identify and address any gaps or issues, and learn and improve from your experience. You can use various indicators to monitor and review your risk performance, such as metrics, targets, benchmarks, or feedback.

6 Update and communicate your risk information

Your risk information is the data and knowledge that you collect and generate from your risk management activities, and how you use it to inform your decisions and actions. Updating and communicating your risk information helps you to keep your risk management relevant and responsive to any changes or developments, and to share your insights and lessons with your team, board, and other stakeholders. You can use various channels to update and communicate your risk information, such as reports, dashboards, meetings, or newsletters.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?