Fundamentals of Risk Management

Risk assessment
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opportunity assessment
Successfully embracing business opportunities is more likely to be achieved if the 
organization undertakes opportunity assessments. Many consultancy firms under-
take a detailed evaluation of each new business prospect. The organization will look 
at the new prospect and evaluate the scope for a profitable partnership, opport-
unities to earn extra income and the reputational benefits that might arise from having 
that potential client as a customer.
Opportunity assessment can be undertaken in relation to new business ventures, 
as well as new clients. This opportunity evaluation is designed to identify the addi-
tional business opportunities that could arise from winning that client business. 
The evaluation will also look at the potential disadvantages of successfully acquiring 
the client prospect. When undertaking such an opportunity assessment, there has
to be the possibility that the organization will advise the client prospect that they
do not wish to tender for the business.
Consider the options for a theatre that discovers that fewer people are coming to 
performances and decides to look at the opportunities to take more money from 
those who continue to attend. The options may include general improvement to the 
catering facilities within the theatre and the provision of organic produce in the 
theatre restaurant. Additionally, there is the possibility of selling merchandise themed 
to the particular performance.
As well as looking at increased revenue during performances, the theatre may
also look at sponsorship arrangements and open dialogue with local businesses to 
discover what type of production would be most likely to gain local support and 
sponsorship. In future, part of the assessment of any proposed new production could 
include an evaluation of the level of sponsorship that might be available. As well as 
generating greater income, this approach could also enable the theatre to stage 
productions that otherwise would have been considered too risky.
Many organizations already practise opportunity management, although it may 
not be seen explicitly as a risk management approach. Ideally, opportunity manage-
ment should be embedded into procedures for developing and implementing strategy 
and tactics and/or taking advantage of business opportunities. Some organizations 
do not have explicit opportunity management procedures for the evaluation of new 
business prospects, or for the evaluation of merger/acquisition opportunities.
When seeking to identify opportunities, many organizations facilitate a risk
assessment workshop that seeks to identify and analyse hazards and opportunities at 
the same time. Figure 14.1 provides an example of a risk matrix that can be used to 
record the outcome of such a risk assessment workshop. The exact design of the risk 
matrix and the descriptors of likelihood and consequence will vary between organi-
zations. Figure 14.1 should be treated as one example or illustration of how to
record the output from the risk assessment workshop.
One of the challenges when undertaking a risk assessment workshop that covers 
both opportunities and hazards is that a wide range of people will need to attend
the workshop. Hazards tend to be operational- and compliance-related, whereas
opportunities tend to be associated with strategy and tactics. As with hazard risks, 
the identification and analysis of opportunities has to be followed by evaluation of 
the opportunities and the identification of actions or controls that will need to be

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