In the contemporary business landscape, managing systemic risk vectors is an essential business function as it allows businesses to ensure uninterrupted services, which is crucial in critical sectors like healthcare and defence.
But, managing risks is not a straightforward task. It needs a nuanced analysis of the business environment pertaining to a business entity, which can be hard to do if you don’t have the right risk assessment tools.
Risk assessment tools are crucial to identify, analyse, and mitigate potential hazards and the risks associated with them.
Leveraging these tools requires a deep understanding of each of them. So, in this post, let’s take a detailed look at what’s a risk assessment tool, the most common risk assessment tools, and how they can be used in a risk assessment workflow.
What is a risk assessment tool?
A risk assessment tool is a procedure, software, program, or framework that can be used in the process of identifying, analysing, and controlling hazards and risks an organisation faces. These tools allow you to determine which measures should be implemented to minimise security risks, as well as prioritise them according to their likelihood and impact.
They are also vital for ensuring the health and safety of your employees and customers, as well as complying with legislative requirements, as some countries like the UK have made it a legal obligation to conduct risk assessments under the Health and Safety at Work and various other laws.
Common risk assessment tools
Now that we have answered the question, what is a risk assessment tool, let’s take a look at 4 of the most common risk assessment tools—risk matrix, decision tree, FMEA, and bowtie model—used by risk management professionals across industries.
Risk matrix
A risk assessment matrix offers a simple and visual way of ranking risks based on their likelihood and impact. A typical risk matrix has five levels of likelihood (very likely, likely, possible, unlikely, and very unlikely) and five levels of consequences (catastrophic, major, moderate, minor, and negligible), and the final risk level is determined using a combination of the likelihood and impact.
This ranking allows you to prioritise which risks need more attention and resources and allocate those resources accordingly.
Decision tree
A decision tree is a graphical tool that demonstrates the possible outcomes, consequences, probabilities, costs and benefits of different decisions or actions. It can be used to compare different options and choose one that maximises your expected value or minimises your expected losses.
A decision tree can also help you identify the most influential factors or uncertainties in your decision and how they affect your results.
FMEA (Failure Mode and Effects Analysis)
FMEA was developed by the US military in the 1940s to identify all possible failures in a design, process, product, or service. Today, the FMEA is regularly used during the design or proposal stage of projects to study potential risks and discover their effects proactively.
This risk assessment tool has tool parts to it; failure modes—the ways that something can go wrong or fail to meet its intended function—and effects analysis—the study of the consequences of those failures on the system or the customer.
Bowtie model
The Bowtie model is a diagram that is shaped like a bowtie that demonstrates the relationships between a hazard, its preventive and mitigative controls, and its potential consequences. It can be used to visualise and communicate how risks are managed in your organisation.
This model also creates a clear differentiation between proactive and reactive risk management.
While these are the most common tools for assessing risks, there are also other tools like What-if analysis, failure tree analysis, and HAZOP analysis. Also, some risk assessment tools are specific to certain contexts, such as healthcare HIPAA (Health Insurance Portability and Accountability Act) or violence prevention.
Leverage risk assessment tools to enhance your risk management capabilities
If you asked yourself the question, what is a risk assessment tool, we hope this blog gave you all the answers you were looking for.
These make the risk management process much easier, as they allow you to identify, measure the impact, and create plans to mitigate operational, technical, health and safety, finance and other non-finance risk vectors.
While the tools outlined in these posts can help you evaluate and manage risks in different contexts and scenarios, not all of them may be compatible with your risk assessment and management workflows.
Depending on your needs and preferences, you can choose the most suitable tool for your situation or combine different tools to get a more comprehensive view of your risks.
