Business planning involves gather information from observation, reading, and testing a firm’s core functions to identify risks to operations and business transactions. Risk analysis can reveal a firm’s project completion problems, security problems, and market-use problems.
Assessing a Firm’s Core Business Functions
Security and control risks are identified through observation and testing. Risk areas include internal operations, customer service, legal, and financials. In today’s high tech business environments, special attention is placed on assessing automated and technology systems.
“You do risk analysis for only one reason: Would you manage the product differently if any of your risks happen?” says Johanna Rothman, a technology product development consultant at Rothman Consulting Group, Inc..
Business intelligence used by risk analysts come from workers, managers, customers, and vendors. It is also derived from a firm’s operational, environmental, and market functions. A qualitative use of business intelligence may reveal actual firm threats and vulnerabilities that require business disaster recovery planning.
Quantitative business analysis can translate business intelligence into a numerical determination of the probability of a future firm risk occurrence. This may be as precise as predicting a 13.5% likelihood of a particular outcome under existing operating factors. Quantitative business analysis is frequently used in the financial business markets.
Business Risk Management: Recovery Planning After Risk Analysis
A good business analyst’s report will include business continuity planning. This is the section of the business assessment report where recommendations are made. It may suggest that the firm develop and implement certain written policies and procedures or secure a particular type of business insurance coverage in light of revealed operational risk. The business continuity plan will also include a cost-benefit analysis comparison of quantitative risk factors against the costs of the business either: 1) doing nothing, 2) retraining or retooling the firm, or 3) insuring against the risk.
Business policies and procedures can correct operational vulnerabilities and ensure that a firm is in operational compliance with the law. Creating a sound employment policy and procedure, that is regularly updated to comply with applicable regulations, can save a firm on needless litigation or reliance on payouts from employment practices liability insurance.
Additionally, business continuity planning may include obtaining additional insurance. Some types of insurances are mandatory for firms based on the applicable international, national, or state law; or whether the firm is operating in a highly regulated industry. The types of business insurances are extensive, but business recovery planning may include securing one of the following insurance policies:
- Bid and Performance Bond
- Business Owner Policy – BOP
- Commercial Auto
- Commercial General Liability
- Commercial Property
- Commercial Umbrella
- Course of Construction/Builders Risk
- Directors and Officers Insurance (D&O)
- Earthquake Residential
- Employment Practices Liability Insurance (EPLI)
- Errors and Omissions Insurance (E&O)
- Health Insurance
- Health Insurance Group
- Home Owners Insurance
- Inland Marine Equipment
- License Bond
- Life Insurance Personal
- Life Insurance Group
- Pollution Liability
- Workers’ Comp
Business risk analysis can be devised internally or contracted out to a business consultant. Greater market exposure, both domestically and internationally, translates into a need to manage business security risks. This makes business risk assessments essential to any size firm.