3. Discuss each of the 4 steps of building of a strategic risk assessment process, and...

3. Discuss each of the 4 steps of building of a strategic risk assessment process, and its potential impact of business and industry.

Expert Solution

Process of building a strategic risk assessment process:

Step 1: Define business strategy and objectives: First of all, you have to define your business strategy and objectives which your firm or business wants to achieve in a mean time. For this, there are lot of tools and models like SWOT analysis, PARETO, PERT etc to define the strategies. This is the one of the main step in building a staategic risk assessment because only on the basis of this, you are able to develop the risk assessment.

Step 2: Establish KPIs to measure results: The next step is to measure how effectively your business is achieving the targets and objectives. To meausre this, use key performance indicators such as: Revenue per client (RPC), Client Retention Rate (CRR), Profit Margin (PM) etc..

Step 3: Identify Risks and establish KRIs: The risk can be identify using variabililty in the performance. The risk like future customer demand which will helps us to determine the results. These types of indicators can be used to identify the risk. After identification of the risks, use KRI i.e. Key risk indicators to measure the tolerance level of risk. KRIs are forward looking leading indicators whereas KPIs measure historical performance.

Step 4: Reporting and Monitoring: Based on KPIs and KRIs, the companies should make a report on the risks they are facing and monitor it to reduce the risk in the future.

Potential Impact of Strategic risk assessment on business and industry:

The potential impact of the strategic risk assessment on business and industry will be of great help. Because, It will prevent the company to deviate from its objectives and targets. As a result, it will help the company in maintaining the efficiency and effectiveness of its goods and services. It will also help in managing the exposure of risk which will help in reducing the risk coverage. It will also help in to make you sure that you are in compliance with regulations.

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