In this tutorial, we will discuss Risk categories in the Risk management process. Risk categories are a way of grouping similar types of risks together based on their characteristics.
Some of the common risk categories are as follows:
- Business Risks
- Safety Risks
- Project Risks
- Product Risks
- Financial Risks
- Political Risks
- Technical Risks
- Security Risks
- Environmental Risks
- Compliance Risks
- Reputational Risks
Safety risks are risks that might cause harm to individuals. A risk in this category is one that, if it materializes may cause harm to customers using the product, employees, etc.
Project risks are risks that are associated with the project. For example, the project may overrun the estimated budget. The actual project costs incurred for building the product are more than expected is a risk.
Product risks are risks that are associated with the product being built. For example, the product that we are building not meeting customer requirements and expectations.
Political risks arise when political influences affect the outcome of a project, such as the risk of a political party coming to power and changing which affects the business of the company.
Technical risks are those that arise from the technology being used to build the product. For example, choosing the wrong technology during the design phase is a technical risk.
Strategic risks arise from an organization’s strategic decisions, such as entering a new market or launching a new product. These risks can affect the long-term viability of the organization.
Financial risks are also called Economic risks. These are risks related to financial transactions and markets, including credit risk, interest rate risk, and currency risk. These risks can affect the financial performance of an organization.
Operational risks are risks related to the day-to-day operations of an organization. These risks can affect the efficiency and effectiveness of an organization. For example, organizational supply chain disruptions, and equipment failures are examples of operational risks.
Compliance risks are risks that are related to complying with laws and regulations, such as environmental regulations or data privacy laws. Non-compliance can result in legal penalties or reputational damage.
These are risks related to an organization’s reputation, such as negative media coverage or customer complaints. These risks can affect an organization’s brand value, customer goodwill, and market share. For example, frequent downtime of the company’s services is an example of reputational risk.
Security risks are risks that are related to information security, such as cyber-attacks, data breaches, data theft, etc. These risks can compromise an organization’s confidential information and intellectual property. A DDoS(Distributed denial of Service) attack on the company’s website is an example of a security risk.
Environmental risks are risks related to natural disasters, climate change, and environmental degradation. These risks can affect an organization’s physical assets, supply chain, and business operations. For example, severe floods might affect business data center facilities is an example of environmental risk.
It is important for business organizations to identify, categorize and manage risks in each of these categories to minimize potential negative impacts on their business.