What Is a Risk Assessment? + Key BI Tools to Accelerate It | Coursera

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Explore how risk assessment in business intelligence helps companies find, analyze, and reduce risks, as well as the different types of risk management.
Risk assessment is a vital process that helps a company understand any risks associated with different business activities, decisions, and projects so they can avoid unnecessary harm. It's a key part of risk management and, as such, can often be a part of a business intelligence team's work.
In this article, we'll discuss what's involved in a risk assessment, how to conduct one, and common risk management methodologies. Afterward, if you're interested in learning more about business intelligence or pursuing a career in the field, consider enrolling in the IBM Business Intelligence (BI) Analyst Professional Certificate, where you'll learn to generate valuable insights through data warehousing, profiling, and evaluation.
A risk assessment is an important process that often involves using data to understand the various risks a company may face when embarking on a new project, decision, or activity. This can include identifying the risk itself, assessing its potential impact, and then communicating any findings to key stakeholders.
Company leaders and decision-makers must understand potential risks when making crucial business decisions. Risk assessments are useful because they can minimize (or outright prevent) risks that may have a negative impact. After identifying specific risks, companies can use this information to determine whether or not to pursue a product or investment—or adjust their approach altogether.
Many companies, especially larger ones, use risk assessment to help them discover trends and weaknesses in their businesses and give them key information to work toward a solution proactively. Depending on the size of the company, this might be handled by a risk management team composed of risk analysts or by a risk manager.
Still, the amount of new technology and fast-paced changes in industries mean that humans might miss important signs. While all companies deal with hazards, some industries, such as finance, construction, software engineering, and manufacturing, face more serious risks and benefit significantly from risk assessment programs.
Business intelligence (BI) tools—typically used to collect, sort, and analyze data—can strengthen a company's risk management efforts. Thanks to the growing challenges businesses face, avoiding risks altogether may not be possible in this day and age, but risk management can help companies handle them effectively. BI tools accelerate those possibilities.
BI tools can be applied to the four steps of risk management: risk identification, assessment, treatment, and monitoring/reporting. They use predictive analytics to find patterns that may lead to risks, allowing companies to take preemptive action to protect the business.
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The type of risk assessment you conduct for your business will depend on how you measure potential risks for the company. Businesses typically measure risk in different ways: financial, operational, strategic, or legal. Let's review each one.
All businesses depend on cash flow, and when a financial risk compromises that, it directly impacts your company’s financial obligations. Financial risks can include delinquent clients, market conditions, or mismanagement of funds. A financial risk assessment can help you figure out where the possibility of risks exists and base your business decisions on this information. Once you determine the possibilities of financial risks using a business intelligence tool, you can proactively create a plan to manage them.
Operational risks can negatively affect the performance of your business. These can occur because of incompetence or failure in your company’s internal processes, employees, or systems. Other causes include external elements like hackers, fraud, or cybersecurity attacks. Using an effective operational risk management program in business intelligence can eliminate or minimize the risks of daily operations. Tools are available to help create an internal control process, organizing operational risks into categories to make potential risks easier to determine.
Companies face two types of strategic risks: business and non-business risks. Business decisions made by upper management, such as poor judgment in expanding into new areas or creating new products that the market doesn’t want, can cause business risks. While they may be external, non-business risks can also affect a company’s strategic objectives. These include the state of the economy, a competitor’s success, and changes in consumer demand. A strategic risk management program that monitors strategic risks can be valuable for minimizing or avoiding these risks.
Regulatory and compliance issues are constantly changing in the ever-changing world of technology, and if you don’t stay current, this can lead to serious legal risks for your company. Because of these potential risks, your business can face more than just a fine. These risks have ramifications that can damage the brand’s overall reputation and ability to grow. When companies don’t comply, the financial risks can be detrimental. Some regulatory rules that your company must follow include data security, compliance with the Fair Labor Standards Act, updating bylaws, providing stock options, and adhering to tax requirements. To minimize financial risks, your company must stay abreast of new risk areas by assessing any recent changes or updates regarding required regulations and rules.
After assessing common risks your company faces, decide which methodology work