Risk mapping is one of the most useful tools that businesses have for risk management. Risk mapping refers to the practice of linking risks with metrics and documents within an organization. This helps in mitigating risks by highlighting the effects of fluctuations in the severity of different risks. Here’s how businesses can use risk mapping:
Establish who will do the risk map
The first thing you need to do is establish a team or person responsible for the business risk map. You can make a group made up of people from different areas of your organization or from a single area in case you have a risk management department.
It is important that the people or persons responsible are clear about the company’s objectives, that they know the business plan and understand the threats in processes, projects, areas, or operations of the company.
Identify the risks of your company
Once the person or team has been chosen, what is a risk will be defined. Whether you, someone else, or a team oversees creating the map, they need to remember that a threat must be something that, if it happens, would affect, or impact the essential operation of the business.
If you already have a risk management control policy, surely in said documentation you have well defined what a risk is; If not, think about the most important aspects for your company and how it can affect it, impacting its natural course. In the same way, it considers all the elements that can lead to economic losses.
A risk is something complex that does not have an immediate solution, its impact will be significant for the objectives of the company; it hampers a process and has a degree of uncertainty or probability (because it may not happen) and a potentially threatening business.
Assess business risks
Once you have identified the risks, you, or the people in charge of the process should assess them, both quantitatively (that is, with a number or a figure) and qualitatively (affecting properties or values that may be more relative and that are not measurable).
At this point it can be useful to carry out a SWOT or SWOT analysis (strengths, opportunities, threats, and weaknesses); if you already have one, review it to nurture your risk map.
To determine the level of risk, it evaluates the probability of the event, that is, how likely it is that this event will occur and analyzes the level of the quantitative impact it would have. With those two variables, multiply the impact by the probability and that will be the level of risk that you will consider. In other words, the higher the impact and probability, the higher the level of risk.
Make the graphical risk projection
With all the above information, a visual or graphic representation of the threat environments can be made; this will be your business risk map.
In a vertical column you or the person (s) in charge will indicate the probability of it happening (little possible, possible, very possible) and a horizontal column that will show the impact (low, medium, critical).
The person in charge of the realization of the map is the one who establishes the levels that he deems appropriate; they can be more or less, for example: unlikely, occasional, moderate, constant; or for the impact: insignificant, minor, major, critical, or catastrophic.
This will generate a heat map that you can mark with colors. For example, green if it is in the quadrants little possible-low impact, possible-low impact, little possible-medium impact; in yellow, if very possible-low impact, possible-medium impact, not very possible-critical impact; and red for possible-critical hit, very possible-medium hit, very possible-critical hit.
You can also add annotations within the map. There you will establish the actions or decision making for each risk. In a complementary way, or instead of this strategy, you can abound more outside the graph.
Implement risk controls
When you already have your risk map, you graphically represent in a simple and obvious way the risks, their level, where they are located and what the actions will be. The stage of implementing risk control is coming, that is, planning: who will attend to what the map indicates, what concrete actions and how it will be done. It also establishes who will carry out the monitoring and the mechanisms to verify that the risk is no longer there or that there is already a control, in case that threat occurs.