A risk assessment is a crucial first step to develop your company’s risk management program. The assessment process itself begins with identifying all potential risks; determining your “risk universe” is a simple and effective way of defining and categorizing these key risks.
A risk universe consists of every risk that could affect your organization, on every level. Anything that could harm your company’s ability to function is a part of your risk universe. While defining your risk universe is an involved process, it comes with a number of benefits. It ensures that no risks are overlooked, allows you to design appropriate budgets, and gives you a language to use when discussing risk with your stakeholders.
Creating Your List of Risks
Your risk universe will be unique to your organization, and you must also determine your risk appetite and what constitutes a tolerable level of risk for your company. There is no one correct methodology used to define a risk universe; on the contrary, you can use a variety of tactics and initiatives to engage in strategic planning.
Start With The Big Picture
A risk universe can seem overwhelming, but there are ways to break down your threats into smaller groups so you can organize them efficiently. Start with broad, large-scale risks, and move toward more specific threats as your list progresses. Consider your industry, location, and size, and compile a list of risk factors inherent to those demographics.
For example, an e-commerce company may be more susceptible to credit card fraud, while a healthcare provider will be at higher risk for HIPAA violations and other regulatory requirements. This top-down approach can give you a starting place for the rest of your list.
Examine Past Issues
Problems you’ve encountered in the past can be indicative of issues you might face in the future. If you’re based in an area where inclement weather or power grid issues have caused business interruptions, that should be a part of your risk universe. If a lack of staff training has resulted in security breaches or miscommunication, include that as well. These past concerns can also be good starting places for conversations about issues you might face down the line.
Establish a Team
Modern organizations are increasingly turning away from traditional risk management in favor of an enterprise risk management (ERM) approach. ERM seeks to look at your company as one cohesive entity rather than individual departments, and can help keep risks from slipping through the cracks.
This requires your teams to work together to account for all risks fully; a risk that is not threatening to one department could be devastating for another. Performing an internal audit that gathers information from all areas of your company will serve you better in the long run than creating a separate risk management department.
Finally, it’s important to use a certain amount of imagination when examining your risk universe. It encompasses not only the risks you currently face, but also any risks you may face moving forward. This will require considering your company from a worst-case scenario perspective. As disheartening as this may seem, it will help you prevent the worst from happening if you consider these possibilities in advance.
Classifying Risks Within Your Universe
Once you’ve listed your risks, you should then determine where all of them fall within the following risk areas. Classifying according to these risk categories can help you better develop an effective risk prevention strategy and prioritize the business risks that require the most attention.
Strategic risk specifically refers to risks that occur when your plans do not go as expected; essentially, an error in your strategy. This could involve shifts in demand or public opinion, an unforeseen competitor, or a change in how your product or service is valued or used.
Operational risk refers to risks that affect your day-to-day procedures. It differs from strategic risk in that it involves internal rather than external factors. Examples include human error, failed internal controls, or miscommunications among your staff and senior management.
Tactical risks are real-time issues that affect your company’s goals and future endeavors. These are threats that are more pressing and urgent than operational or strategic risks. Drastic changes in the stock market, natural disasters, and large-scale information security breaches would fall into this category.
Emerging risk refers to risks that are approaching, but may not yet be on your radar. New technologies, climate change, and shifts in government policy are all possibilities to consider.
Make ZenGRC Part of Your Risk Mitigation Plans
Risk mitigation is a challenging but necessary step in your organization’s growth. Planning for your future and creating a strategy for specific risks can save you money and assure that your company can survive and expand, come what may. If you need a risk management solution that will help you track risk throughout your organization, ZenGRC can help.
ZenGRC is an integrated software solution that gives you a real-time view of your company’s risk and compliance landscape. By providing you with a central database of your risk management efforts, ZenGRC helps you streamline your decision-making, avoid redundancies, and protect yourself and your clients. Schedule a demo today to learn how ZenGRC can help you organize your risk universe.