Just having finished a risk analysis on a real estate and financial transaction I made the following reflection on how to make the stakeholders understand the full picture of what I am trying to conveying.Being presented with the concept of “risk” the most common perception and systematic is to divide it up in the conventional order of f.i:
- Business risk
- Operational risk
- Legal risk
- and on the list it goes…
This is a classical part of any new business venture or IPO prospect where the disclaimers are clearly divided and described in such a way. It is a necessary process and one that any new business venture must go through. It takes various types of professionals in the various stages of the process to generate the correct answers and analysis. But it is always necessary to have one professional with the experienced in weighing all the aspects of the risk together and skilled enough to paint a picture to the stakeholders what it actually entails for their risk of investment. This is the conventional view and way to handle analyse risk. I like to analyse it from another perspective on top of that
- The risk you can quantify and mitigate
- The risk you can quantify but not mitigate
- The worst risk of them all….the one no one has yet not found out is exists.
A good risk analyst must be able to report to the stakeholders in a way that the 2 first are easily and clearly understandable. An important part of the process is to clearly define and implement contingency plans if number 2 should appear. The most important is though to keep analyzing and keep researching and ask every possible and impossible question and analyse every answer to find new questions to ask, in order to minimize no 3 as number 3 is the one no one is prepared to handle if it should appear.