Evaluating risk vs. reward is a process most people go through on a daily basis. For example, you are about to make a left-hand turn but a car is coming. You think you can make it but heâ€™s kind of coming fast. The risk, of course, is misjudging his speed and getting into an accident.
At Ready.gov a risk assessment is a process to identify potential hazards and analyze what could happen if a hazard occurs. A business impact analysis (BIA) is the process for determining the potential impacts resulting from the interruption of time sensitive or critical business processes.
A business impact analysis (BIA) predicts the consequences of disruption of a business function and process and gathers information needed to develop recovery strategies. Potential loss scenarios should be identified during a risk assessment. Operations may also be interrupted by the failure of a supplier of goods or services or delayed deliveries. There are many possible scenarios which should be considered.
Risk is a fundamental part of a small business operation. The question is how much attention you pay to each risk and what the reward is for reducing the risk. The cost/benefit key is to effectively recognize risk and reduce it with as little investment as needed.
Be able to define, articulate and be alert to what risks the organization may face in a given year. If any of these risks could cause loss in any way, they need to be addressed far in advance.