Risk analysis (Business)


Risk analysis (Business)

Risk analysis is a technique to identify and assess factors that may jeopardize the success of a project or achieving a goal. This technique also helps to define preventive measures to reduce the probability of these factors from occurring and identify countermeasures to successfully deal with these constraints when they develop to avert possible negative effects on the competitiveness of the company.

One of the more popular methods to perform a risk analysis in the computer field is called Facilitated Risk Analysis Process (FRAP).

Facilitated Risk Analysis Process

FRAP analyzes one system, application or segment of business processes at time.

FRAP believe that additional efforts to develop precisely quantified risks are not cost effective because:
* such estimates are time consuming
* risk documentation becomes too voluminous for practical use
* specific loss estimates are generally not needed to determine if controls are needed.

After identifying and categorizing risks, The Team identifies the controls that could metigate the risk. The decision for what controls are needed lies with the business Manager.The team's conclusions as to what risks exists and what controls needed are documented along with a related action plan for control implimentation.

Three of the most important risks a software company faces are unexpected changes in revenue and costs from those budgeted and amount of specialization of the software planned. Risks that affect revenues can be unanticipated competition, privacy, intellectual property right problems, and unit sales that are less than forecast; unexpected development costs also create risk that can be in the form of more rework than anticipated, security holes, and privacy invasions. [cite journal
author=Messerschmitt, D. G. and C. Szyperski|title=Marketplace Issues in Software Planning and Design|journal=IEEE Software|volume=21|issue=3|month=May/June|year=2004|pages=62–70|doi=10.1109/MS.2004.1293074
]

Narrow specialization of software with a large amount of research and development expenditures can lead both business and technological risks since specialization does not lead to lower unit costs of software. [cite journal
author=Rao, P.M., and J. A. Klein|title=Growing importance of marketing strategies for the software industry|journal=Industrial marketing management|volume=23|issue=1|month=February|year=1994|pages=29–37|doi=10.1016/0019-8501(94)90024-8
] Combined with the decrease in the potential customer base, specialization risk can be significant for a software firm. After probabilities of scenarios have been calculated with risk analysis, the process of risk management can be applied to help manage the risk.

Methods like Applied Information Economics add to and improve on risk analysis methods by introducing procedures to adjust subjective probabilities, compute the value of additional information and to use the results in part of a larger portfolio management problem.

See also

*Benefit risk
*Cost risk
*Optimism bias
*Reference class forecasting

References

*cite news|author=Doug Hubbard|year=1998|title=Hurdling Risk|publisher=CIO Magazine

External links

* [http://www.solver.com/risk-analysis/ Risk Analysis Overview and Tutorial - solver.com]
* [http://csrc.nist.gov/publications/nistpubs/800-30/sp800-30.pdf information Risk Analysis is GOOD!]
* [http://gunston.gmu.edu/healthscience/730/default.asp Decision Analysis in Health Care] Online course from George Mason University providing lectures, information, and tools for risk analysis in health care settings.
* [http://www.vosesoftware.com/ModelRiskHelp/index.htm#Introduction_to_risk_analysis.htm An introduction to risk analysis - vosesoftware.com]


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Risk analysis — can refer to: *Risk analysis (engineering) **Probabilistic risk assessment, an engineering safety analysis *Risk analysis (Business) * Certified Risk Analyst …   Wikipedia

  • risk analysis — noun A methodical investigation process undertaken to assess the financial and physical risks affecting a business venture • • • Main Entry: ↑risk …   Useful english dictionary

  • Risk analysis (engineering) — This article is about engineering. For other uses, see Risk analysis. Risk analysis is the science of risks and their probability and evaluation. Probabilistic risk assessment is one analysis strategy usually employed in science and engineering.… …   Wikipedia

  • risk analysis — The consideration of risk in a business, project, or decision. It involves the identification of risk, the classification of risks in regard to their impact and likelihood, and a consideration of how they might best be managed. See risk… …   Big dictionary of business and management

  • Risk — takers redirects here. For the Canadian television program, see Risk Takers. For other uses, see Risk (disambiguation). Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable… …   Wikipedia

  • Business continuity planning — life cycle Business continuity planning (BCP) “identifies [an] organization s exposure to internal and external threats and synthesizes hard and soft assets to provide effective prevention and recovery for the organization, whilst maintaining… …   Wikipedia

  • analysis — a‧nal‧y‧sis [əˈnælss] noun analyses PLURALFORM [ siːz] [countable, uncountable] 1. a careful examination of something in order to understand it better: • The researchers carried out a detailed analysis of recent trends in share prices. •… …   Financial and business terms

  • risk analyst — analysis a‧nal‧y‧sis [əˈnælss] noun analyses PLURALFORM [ siːz] [countable, uncountable] 1. a careful examination of something in order to understand it better: • The researchers carried out a detailed analysis of recent trends in share prices …   Financial and business terms

  • business case — A structured proposal for USPS business process improvement that functions as a decision package for USPS leadership. A business case includes an analysis of business process needs or problems, proposed solution, assumptions and constraints,… …   Glossary of postal terms

  • Risk management — For non business risks, see risk, and the disambiguation page risk analysis Example of risk management: A NASA model showing areas at high risk from impact for the International Space Station. Risk management is the identification, assessment,… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.