It is not the manager’s job to prevent risks. It is the manager’s job to make it safe to take them.
Ed Catmull, president of Pixar Animation and Disney Animation
Risk is an unavoidable part of business. It comes up in nearly everything we do, from hiring new staff to taking on projects that are outside our comfort zone.
But risk, as most of know it, has a lot of bad connotations. People hear the word and they assume the worst. Because of this, there can be a hesitation around taking risks, especially in the business world. Projects might fail. New hires might not stay. New features might not be what customers are looking for.
Without risk, though, though, you can’t succeed. It’s why, rather than avoid risk altogether, businesses use strategies (and templates) that help them understand whether a risk is one that’s worth it, or whether it’s going to burn the whole business down in the process.
That’s where risk analysis comes into play.
What is risk analysis?
is the process of examining the various potential risks that might come up over the course of a project and is a part of risk management as a whole in business. It allows you to both qualify and quantify potential project risk to see how they might affect the final product. Risk analysis doesn’t remove risk from projects, but it gives you a way to use preemptive mitigation for potential problems or put systems in place to deal with risks that you may encounter. The end result being that you’re making smarter decisions around the risks involved with any given decision (or project) because you’ve carefully considered as many possibilities
In project management, there are two ways that risk tends to be analyzed, qualitative and quantitative.
Qualitative risk analysis
Qualitative risk analysis is looking at how likely something is to happen based on factors such as whether they’re likely to actually happen and impact (along with other relevant factors that may exist within your company). Qualitative analysis allows you to decide which risks are worth focusing on and which ones you can reasonably ignore. You run a qualitative risk analysis to help you save time and energy by not focusing on every possible risk (because there are going to be some that just aren’t worth looking at). Instead, you look at the ones with the biggest negative impact on a project and those that are highly likely to actually occur.
Quantitative risk analysis
With quantitative risk analysis, you’re looking at the risks identified as noteworthy in the qualitative risk analysis phase, digging deeper into the potential impact of the risk, and assigning a numerical value based on that impact.
Essentially, you’re assessing factors like the impact on cost, schedule, and outcome to determine how much any given risk might affect the project. The higher the number, the greater the risk. A risk assessment matrix template can help with this stage.
What is the purpose of risk analysis templates?
Risk assessment templates give you a way to systematically analyze risks that you may encounter in a project. With the right customization, they can be used to help with the specific kinds of risks that apply to your business and allows you to focus on creating better processes and working smarter within your organization.
The more you think about what
happen before you start a project, the easier planning becomes. To some, it might seem like you’re looking too hard at all the negative things that
happen. But risk isn’t always a bad thing. It’s just something that could happen that might impact the desired outcome.
With a thorough risk analysis, you’re giving yourself a way to prepare for all the things that might happen, good or bad. It allows you to be proactive about dealing with risks as they come up, rather than scrambling to fix something after the fact. That way, if something does go wrong, you’ll look way more professional when you deal with the problem because you’ve already put a plan in place.
Improving business safety
You can’t avoid risk in your business, but you can put better systems in place to manage it. Risk analysis gives you a way to put risk control in place before you even start. This way, when something happens during a project, even if it’s a high-risk situation, you’ll be able to handle it in a way that reduces the overall potential impact of risks.
When risk mitigation becomes a regular part of your projects, you don’t reduce the level of risk, but you become more adept at managing it. The better you get at managing risk, the more secure your business will be, even when things go wrong.
Preparing for possible future hazards
The more time you spend thinking about risk in your business and the projects that you run within your business, the better prepared you’ll be for, well, everything. Even if you discover a kind of risk that you’ve never seen before, when you have plans and templates in place to help you figure out the best possible way to manage these new issues as they arise.
👉 Get started with this free risk analysis template
After you copy this template, you can start utilizing this free risk analysis template for your projects and your business.
How to use risk analysis template by Coda
Step 1: Set up risk properties
Before you start listing all the risks associated with a project, there are a few risk properties you need to define. These are all in the
page. For instance, the
includes things like
, but your company may have different risk categories. There are also
to define. We put some default values in these lists, but you should customize this based on the needs of your company.
Getting these properties listed out correctly is important since they are referenced in the main
table which we’ll discuss in the next step.
Step 2: Add risks and evaluate impact
The main part of this template is the
page. On this page, you can add new risks to the
. For each risk you identify, you can add info related to this risk like the risk’s
, and the
. You’ll notice that some of the dropdowns in this table are populated by the properties you set up in the previous step (see the
page). Once you have all the risks for your project entered in, it’s time to do the actual risk analysis in the next step.
Step 3: View your project’s risks in different ways
pages, you’ll see the same list of risks you created from step 2. However, the list of risks in these pages are
of the main table. This means that whatever you add or edit in the main
will get reflected in these pages.
The purpose for these different
is to analyze your project’s risks across multiple dimensions. If you only want to see the top-ranked risks in terms of the dollar impact, you would look at the
page. To see the “most likely” and “highest rated” risks, you would consult the
page to see which risks should take most of your attention.
Common FAQs about risk analysis templates
What is the difference between risk analysis & risk assessment?
Risk analysis and risk assessment are similar, but different aspects of project management. With risk assessment, you’re looking at the big picture. What might happen, how might a project be affected if it does, and how are we going to deal with it? It’s pretty high level.
With risk analysis, you’re going deeper into each risk and looking at what the likelihood of each risk happening is, what the impact on the project (or business might be), and how you can avoid it. You’re taking a more analytical approach, factoring in both qualitative and quantitative analysis when looking at risks (as we discussed above).
How do you write a risk analysis?
The best way to write a risk analysis is to follow a template that walks you through the five main steps in a way that makes the outcome clear. Templates help because they remove the guesswork from the process. You’re not struggling to remember anything that might be critical because everything is laid out with a clear path in a logical order.
Ideally, you’re following a five step process that helps you identify and manage risk.
What are the five main steps in risk analysis?
The five steps of risk analysis are:
Identify the risks.
Start by figuring out what the possible risks are for any given project. You may have a list of identified risks already put together from past projects, which helps, but you should always try to look at each project with fresh eyes to avoid missing anything.
Analyze the risk.
Do both a qualitative and quantitative analysis on the risks you’ve identified to help you rank them by likelihood and severity. This allows you to know what risks you should be focusing on during the planning stages and helps you come up with possible solutions.
In this stage, it helps to have more than one solution for each possible risk. It may feel redundant, but having a backup plan to handle different variables could be the thing that saves your butt if something happens. Talking to various stakeholders about how they solve these project risks can help a lot in this stage.
Pick a solution.
Choose one of the solutions you came up with in the previous stage for each of the risks that you identified and analyzed. You don’t have to stick with this mitigation plan, but have an action plan ready to go, just in case.
Document and review.
As always, take the time to document any risks that come up during a project, how you dealt with them, and whether or not you had an effective solution in place. When you’re done, review everything to see where you could improve for next time. There isn’t always going to be room for improvement, but even smaller improvements to how you deal with risk add up over time.
What are the risk rating categories?
We talked about ranking the risks when doing quantitative analysis using a numeric system. This system is usually attached to risk rating categories that define how much of a risk something is. The four risk rating categories are:
You attach a number to each of these to help further define how likely risk is to occur over the course of a project. This helps you understand at a glance whether a business risk is going to happen or not.
What are the main risk categories?
There are a lot of ways that you can categorize risk, but we’ve found that they tend to fall under one of the following categories:
Will the equipment you’re using break down during a project. This could be anything from software glitching to servers crashing. These tend to be the most unpredictable because, unless there are clear warning signs that something isn’t working well, you likely won’t know until it happens.
These are things like your supply chain, contractors, natural disasters (like hurricanes or forest fires), anything that you rely on for projects, but are outside of your control.
Here we have the business risk that exists inside your company. This includes budget, staffing, leadership, and all the other things that exist within your business that can impact the success of a project.
Project management risks.
Finally there’s project management. How well prepared for the project are you, as project manager? Do you have plans, the staff you need, the resources you need, have you come up with a clear timeline? Any one of these areas have the potential for risk that can have a negative impact on your project.