Qualitative risk assessments are used by companies to both identify and limit the risks of doing business. Such assessments must be able to spot potential threats to business operations as well as vulnerable areas of business practice. Armed with this information, companies must devise preventative measures and corrective steps to keep operations healthy and on schedule. Qualitative risk assessments differ from quantitative assessments, which assign numerical values both to the likelihood of risks occurring and to the amount of damage that would be caused by a possible disaster. In essence, qualitative risk assessment is the development of a company's philosophical response to risk management; it is an exercise that involves stakeholders in recognizing problems and envisioning responses that are in keeping with company policies.
One of the most important tasks that a company or business must undertake is risk management. Just ignoring risk and hoping that nothing bad will ever happen to the company is a surefire recipe for disaster. Companies that hope to last for a long time must be ready for any worst-case scenario to arise. That preparation can make the difference between a company that survives an unexpected blow and one that succumbs to it. Qualitative risk assessments are useful tools in the process of risk management.
Performing qualitative risk assessments requires a great deal of diligent work by companies. The people in charge of such assessments have to follow several different steps along the way to a total assessment. Identifying the risks involved with all aspects of a business is the first of these steps. This can be a difficult task, especially in terms of separating actual threats from ones that aren't likely to occur. Specialists or consultants can be hired to assist business leadership in evaluating business records, accounts, and practices to include in such assessments.
Once threats are identified and delineated, the process of devising measures to either eliminate them or lessen their impact is the next step for all effective qualitative risk assessments. Part of this process also involves determining the risks that would cause the most damage if they are realized. By doing this, companies can devote the bulk of their resources to preventing the most potentially harmful threats. This process is most effective when it is collaborative, involving the individuals at all levels who will be involved in responding to issues.
It is important to realize that qualitative risk assessments should also provide plans for correcting problems once they happen. Even the most effective preventative methods might not be effective against certain damaging occurrences, so companies must be prepared to act efficiently in response to predictable issues. All of the potential hazards and their remedies should then be included in some sort of chart or document for easy reference.