Risk Consequences
The consequences of risk can be of many types, and can be categorised in different ways. At The Risk Agenda we find it helpful to think about three main types:
  • financial
  • safety
  • reputational.

    Most risks that are identified in organisations have a financial consequence of some sort. It might be the effect on the cost of a project, or the overspend of a budget. Financial consequences are relatively easy to estimate to an order of magnitude.

    Safety is important because we are especially concerned with risks that have the potential to kill or injure people. Reflecting the precautionary approach which is required, safety is also the subject of strict regulation. Our starting point for safety risk management is that we will only choose between options which are safe. We think it is not particularly helpful to pursue a course which sets safety as one consequence and aims for an approach to risk management which integrates safety with other business risks. There is a RiskBite on safety risk modelling. The same approach can be used for all consequences where a precautionary approach is applied.

    Reputational risk is far less tangible than the other categories. It relates to all risks which affect the the longer term future of the business. In effect this means things that damage the confidence of stakeholders. This might be the impact on your share price or consumer confidence in your products. This area requires you to think broadly about the consequences of any decisions. Try to develop scenarios which map out what can happen and don't be too narrow in your thinking.

    And two final points:
  • don't forget that some risks have positive consequences; they are called opportunities
  • all organisations have to take risks; some of the risks will happen - that does not mean you shouldn't have taken them.