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RISK
J O H A N N L O H R M A N N
S R . B U S I N E S S A N A L Y S T
W W W . J O H A N N L O H R M A N N . C O M
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DEFINITION OF RISK
Process that helps identify and
manage potential problems that
could undermine key business
initiatives or projects.
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WHEN DO I CONDUCT RISK ANALYSIS?
Planning projects: anticipate and neutralize possible problems.
Deciding to move forward with a project.
Changes in environment: new competitors coming into the market, or changes to government policy.
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HOW DO I CONDUCT RISK ANALYSIS?
1. Identify
2. Estimate
3. Manage
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1. IDENTIFY THREATS
Project Going over budget, taking
too long on key tasks, or
experiencing issues with product or
service quality.
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WHAT TOOLS DO I USE TO ANALYZE RISK?
SWOT
Failure Mode and Effects Analysis
(FMEA)
Scenario Analysis6
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SWOT
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FAILURE MODE AND EFFECTS ANALYSIS
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SCENARIO ANALYSIS
1. Define the Problem
2. Gather Data
3. Separate Certainties From
Uncertainties
4. Develop Scenarios (Good
Outcomes vs. Bad Outcomes)9
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2. ESTIMATE THE RISK
Risk Value = Probability of Event x
Cost of Event
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RISK VALUE: DEFINITIONS
Probability: A risk is an event that
"may" occur.
Impact: impact varies in terms of
cost and impact of a critical factor.
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HOW DO I ESTIMATE THE RISK?
Identified Risk: Rent may increase
Percentage Likelihood that the rent will
increase: 80%
Cost to Business: $500,000
Risk Value
0.80 (Probability of Event) x $500,000 (Cost
of Event) = $400,000 (Risk Value)12
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ANOTHER WAY TO ESTIMATE THE RISKSLow impact/low probability Often
ignore them.
Low impact/high probability Cope.
Reduce likelihood they'll occur.
High impact/low probability High
importance, unlikely to happen.
High impact/high probability
Critical importance, top priority.
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3. MANAGE THE RISK
Avoid
Share
Accept
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AVOID THE RISK
Conduct What If Brainstorming
Session.
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SHARE THE RISK
Potential gain with other people,
teams, organizations, or third
parties.
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ACCEPT THE RISK
Conduct an Impact Analysis.
Create a Contingency Plan.
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CONTROL THE RISK
Intelligent Risks
Business Experiments
Preventative Action
Detective Action
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BUSINESS EXPERIMENTS
1.Create a Hypothesis
2.Design Your Experiment
3.Run the Experiment
4.Analyze Results and Follow Up if Necessary
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CONTROL THE RISK TOOLS: PLAN, DO, CHECK, ACT
Step# Benefit
1. Plan Define the Problem
2. Do Generate Solutions
3. Check Look at the Effectiveness
4. Act Continuous Improvement
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RISK
J O H A N N L O H R M A N N
S R . B U S I N E S S A N A L Y S T
W W W . J O H A N N L O H R M A N N . C O M
