what is risk analysis 
the term risk analysis refers to the assessment process that identifies the potential for any adverse events that may negatively affect organizations and the environment risk analysis is commonly performed by corporations banks construction groups health care etc governments and nonprofits conducting a risk analysis can help organizations determine whether they should undertake a project or approve a financial application and what actions they may need to take to protect their interests this type of analysis facilitates a balance between risks and risk reduction risk analysts often work in with forecasting professionals to minimize future negative unforeseen effects understanding risk analysisrisk assessment enables corporations governments and investors to assess the probability that an adverse event might negatively impact a business economy project or investment assessing risk is essential for determining how worthwhile a specific project or investment is and the best process es to mitigate those risks risk analysis provides different approaches that can be used to assess the risk and reward tradeoff of a potential investment opportunity a risk analyst starts by identifying what could potentially go wrong these negatives must be weighed against a probability metric that measures the likelihood of the event occurring finally risk analysis attempts to estimate the extent of the impact that will be made if the event happens many risks that are identified such as market risk credit risk currency risk and so on can be reduced through hedging or by purchasing insurance almost all sorts of large businesses require a minimum sort of risk analysis for example commercial banks need to properly hedge foreign exchange exposure of overseas loans while large department stores must factor in the possibility of reduced revenues due to a global recession it is important to know that risk analysis allows professionals to identify and mitigate risks but not avoid them completely types of risk analysismany people are aware of a cost benefit analysis in this type of analysis an analyst compares the benefits a company receives to the financial and non financial expenses related to the benefits the potential benefits may cause other new types of potential expenses to occur in a similar manner a risk benefit analysis compares potential benefits with associated potential risks benefits may be ranked and evaluated based on their likelihood of success or the projected impact the benefits may have a needs risk analysis is an analysis of the current state of a company often a company will undergo a needs assessment to better understand a need or gap that is already known alternatively a needs assessment may be done if management is not aware of gaps or deficiencies this analysis lets the company know where they need to spending more resources in in many cases a business may see a potential risk looming and wants to know how the situation may impact the business for example consider the probability of a concrete worker strike to a real estate developer the real estate developer may perform a business impact analysis to understand how each additional day of the delay may impact their operations opposite of a needs analysis a root cause analysis is performed because something is happening that shouldn t be this type of risk analysis strives to identify and eliminate processes that cause issues whereas other types of risk analysis often forecast what needs to be done or what could be getting done a root cause analysis aims to identify the impact of things that have already happened or continue to happen 