Risk analysis is part of the risk assessment process that focuses on forming an understanding of the presented risk. This includes the likelihood of an event occurring, especially if it could have a negative impact. It follows a pragmatic approach that helps organizations determine whether they should undertake a particular project or change initiative based on potential risks involved.
It comprises looking holistically at risks, including factors like the cause of the potential risk, the effectiveness of existing controls, consequences (or impact), and how to measure the risk. Risk analysis also covers steps that the organization can take to mitigate or reduce the risk to an acceptable level.
While risk analysis and risk assessment may appear similar, they are slightly different processes. Risk assessment is the end-to-end process of acknowledging and understanding risk. Risk analysis is part of risk assessment and takes place after risk identification.
By looking at each individual risk in detail, analyzing various aspects to measure the risk, this helps teams to devise a plan to minimize impact - rather than relying on guesswork.
Change lifecycles can occasionally introduce uncertainty to an organization. The best way to tackle risk in a change lifecycle is to take a proactive, rather than reactive, and structured approach.
Holding regular risk analyses throughout change management lifecycles will help you to stay on track with the project and keep a log of everything that has happened and why. Having this well documented will support you with future change lifecycles as you will have greater awareness of the possible impacts - and the risk in change initiatives - to keep the initiative running smoothly.
Ahead of initiating your change lifecycle, set time aside to work with stakeholders and identify all the potential risks for the project and any areas of uncertainty. Consider anything that could have a negative impact on the change process. This could include operational disruptions, issues with compliance, or lack of strategy alignment.
At this stage, keep the change you’re trying to implement as the core focus so that your risks and uncertainties are relevant.
When analyzing risk, first decide whether you are going to take a qualitative or quantitative approach. The type of analysis you choose will determine the risk score or level, and help to prioritize your list of risks (i.e., the risk register) based on the severity of the risk and its potential impact. Your internal benchmarks will guide how you designate the level of severity to each risk.
Potential impact
Now you have a comprehensive (but potentially non-exhaustive) list of risks and uncertainties. When defining the potential impact of these risks, it’s important to also consider the potential consequences should they materialize. Make notes for the possible consequences of each risk and what actions you need to take to either reduce or mitigate the risk.
Look at the risks you’ve identified and analyze and begin devising strategies or action plans to overcome them. This can include preventative measures (to minimize the chance of the risk occurring), mitigation strategies, and contingency plans. Factor some flexibility into your solutions as things could change as the change lifecycle progresses.
When performing risk assessment or analysis, there are two different approaches to consider. Both qualitative and quantitative approaches have the same end result but use a different method of analysis.
Qualitative risk analysis can be quicker to perform but is more subjective in nature. Quantitative risk analysis, however, is driven by actual data, that is specific to the project or initiative, to produce the risk ratings and scores.
There are tools available to support you with risk throughout a change management lifecycle. Using tools can make the transition throughout the process smaller and minimize disruptions.
Risk register
Risk registers are essentially a list of all the possible risks that could take place throughout a project. They are living documents and should be regularly updated based on how the initiative progresses - as there may be unknown risks that appear that weren’t previously considered or forgotten about - which will support preparation efforts for other future projects. Risk registers also keep stakeholders aligned and accountable throughout the project lifecycle.
You can download our example risk register here
Heat maps
Heat maps are an excellent way of visualizing risk. They are color-coded to display risk based on the likelihood of them occurring and their impact. Heat maps are useful as they offer a quick way of seeing the most severe risks within a project. This is also helpful for structuring risk mitigation strategies as you can understand which risks are priority to formulate the strategy.
Stakeholder analysis
Stakeholder analysis supports project teams in understanding how a stakeholder (either internal or external) might pose a risk to the project or change initiative, and how to manage that risk. This will include looking at their seniority within the organization as well as their involvement in the project. Stakeholder analysis helps project leaders especially as it can help in forming a clear strategy thanks to identifying who can assist in making decisions at each project stage based on their position and knowledge. Stakeholder analysis is a powerful tool within risk management and supports risk reduction activities.
Risk analysis forms a critical part of the risk assessment process and should be included in change management processes. There are various approaches you can take towards analyzing risk - the chosen approach will align with your organization’s risk appetite. By using tools in your change management process, you will be able to accurately assess and analyze risk to minimize disruptions to business-as-usual-activities and benefit from a smoother transition period. Tracking risk development throughout change lifecycles will help you to prepare for future projects, better understand your risk prioritization in change, and be more successful at managing risk in organizational initiatives.