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How much are you affected when an advertisement worth thousands of dollars, doesn’t reach the right audience? Do you have a plan to correct the issue, or will you be left scrambling to recoup as many losses as you can?
Risk analysis helps identify risks before they happen, so you can effectively respond with the right plan of action. Using risk analysis for projects is typical. But what about new expansions or legalities? If you’re only realizing the benefits of risk analysis after something goes wrong, you’re using it wrong.
Don’t skip it, especially for these three specific occasions.
1. For every business venture
A smart business doesn’t waste their resources on lousy business ventures. The only way to know if this investment is cost-effective — or as effective as tossing your money through a shredder — is by understanding the risks. Risks are relative to how much resources, time, and money you spend versus the expected profits or results.
Stakeholders who leap into a venture because of gut feeling don’t last long. It’s not just results that matter. If profits increase by 3%, it means nothing if you’re 50% over budget. In the end, that’s could be a massive loss.
The profit increase sounds good until you put it in perspective. What are the associated risks? That’s what you need to know, and how it’ll affect the company.
And if you did blow through the marketing budget by 50%, your other ventures suffer. Too much money was put into one channel so others that show signs of being less risk but high reward, will rot.
Not good all around.
2. The big projects
Some projects are high stakes.
They take years or longer to complete. Typically, the longer the project, the more extensive the budget and resources allocated. People who conduct risk analysis (your friendly business analyst) tend to focus on the big projects precisely for these reasons.
The initial investment of resources and money for a big project can be massive. But if the project is extended, it’ll require more resources. So, there are multiple risks to calculate. The first is the risk of the project with the initial deadline:
- How (much) is the company affected if the project fails or fails before the deadline?
- What is the initial investment?
- Who is most affected by the project’s success or failure?
These questions expand when the project is extended:
- What additional expenses have occurred since the project began?
- Are additional or new resources necessary for project completion?
- Do you need new teammates on board?
- If an investor pulls out, how much is the projected affected?
Unlike other types, risk analysis should be an in-depth study of your projects. It requires additional checkups, assessing how initial risk analysis changes as the project does. Never skip risk analysis for big projects, whether they’re high risk or not.
Risk analysis is crucial for business-related legalities and regulations. It’s not just the legislation paperwork, but trademark violations, contract breaches, and workplace disputes. Do you have a plan — not just if others violate contracts or trademarks, but if you or your employees do? If a violation occurs, who is affected and how?
Legalities tend to be complicated, but it’s the rigidness that makes it easier to create actionable plans. You need the right counsel and knowledge of laws for proper risk analysis. Not only can breaking contracts be expensive, but also quite costly and time-consuming. How does this affect business activities? Will it change your brand image, or disrupt communication with customers?
Don’t try to fix something after everything has gone wrong. Be the person who knows exactly what to do with when plan A, B, and C fail. Use risk analysis in these occasions to save yourself a whole lot of grief.