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Risk Analysis

2 min read
Nov 12, 2018

Risk analysis is an important part of risk assessment. Risk assessment includes identifying risks, analyzing risks, identifying options, determining best options, and relaying all that information to the decision-makers. Risk analysis is the part of that overall process that deals with the analysis of information about the potential loss.

Risk analysis begins with quantifying the risks. The inherent risk in the institution is defined as the probability that a harmful incident will happen and the impact it will have on the institution. This may include studying and comparing data from different situations and time frames. For example, analyzing the number of errors that happened in the holiday season last year can help the company predict how probable the risk is that those errors will happen again on the same day this year as well as what impact that event will have on the institution. 

Once the probability of harm is known, the next step in risk analysis is to estimate the impact on the health of the company. In the case of errors that are likely to happen at a certain time of year, the company needs to know what adverse effects those errors will have if they happen this year.

When the various uncertain variables are evaluated, and impacts noted, the decision-makers are notified. Risk management software makes this process easier. These variables then are used as inputs within the risk analysis model to create a range of possible outcomes. 

As the risk model is being created, a large amount of data is generated. All this data must then be compiled in a meaningful way so that it can be used throughout the rest of the risk assessment process. Risk analysis software makes this process more efficient. Then, with accurate information about the risks, options for dealing with the risks can be identified and evaluated.

Dealing with risks usually involves putting controls into place. For example, if a harm is very likely to happen and the impact would be great, the organization might change a process to minimize the risk. Then after risk analysis is completed and controls are put into place, risk analysis continues as the residual risk is determined and evaluated.

Inherent risks can change as the bank changes policies, procedures, vendors, and software. So, inherent risk must be assessed continuously. What is more, there is not just one risk in an organization, but many. With customizable software, you can analyze all the risks the institution faces or analyze only some of the risks. 


Related: Creating Reliable Risk Assessments

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