In our People at Rosabon series, we catch up with our in-house experts as they share some insights on how the company works.
We want our clients to get to know the people behind the brand. These experts will also offer useful tips and advice that entrepreneurs and other business people can tap into. Today’s session is with Taiwo Coker, the Financial Risk Analyst at Rosabon.
You can read what he has to share about Risk Quantification below:
As an individual or corporate organization, it is important to identify and mitigate your key business risks. To do this, however, you must quantify your risk. In other words: “In order to manage it, you must measure it”.
Risk quantification is the process of evaluating the risks that have been identified and developing the data that will be needed for making decisions.
The major objective of quantification is to establish a way of arranging the risks in the order of importance, this is essential because In some cases there will not be enough time or money to take action against every risk that is identified.
The severity of the risk is a practical measure for quantifying risks. Severity is a combination of the risk probability and the risk impact. In its simplest form, the risks can be ranked as high and low severity or possibly high, medium, and low. At the other extreme, the probability of the risk can be a percentage or a decimal value between zero and one, and the impact can be estimated in naira. When the impact in naira and the probability in decimal are multiplied together, the result is the quantitative expected value of the risk.
Risk is an integral part of every business operation. The success of a company’s risk management strategies has a direct impact on the company’s overall success. There needs to be statistical evidence to influence and back up all your business decisions, and this is where risk quantification comes in. In business, some risk factors are more urgent and pressing than others and it would be unwise to tackle the less pressing risk factors before the more pressing ones. Risk quantification helps us allocate scarce resources effectively and efficiently.
Very insightful. Tanks