Interscale Content Hub – In the architecture, engineering, and construction (AEC) industry, risk is always there, lurking in the shadows. So, why is it important to have a risk assessment?
Having a solid risk assessment process is not just a good idea, it’s a must for any AEC company that wants to stick around and succeed long-term.
Safe Work Australia says in its 2023 report, “Key Work Health and Safety Statistics Australia,” construction is one of a few industries with a higher rate of serious claims.
In fact, there are 9.8 serious claims per million hours worked for construction workers. This makes construction one of the industries with a lot of compensation claims.
But what about the IT landscape? Let’s get the details on the table.
The Importance of Risk Assessment, Why Is It Important?
There are four main reasons why it’s important to assess risks; to make sure you’re following the law, to keep your staff and customers safe, to make your business more efficient, and to keep your finances healthy.
Just to give you a heads-up, you can take a look at “Why Is It Important to Perform a Risk Assessment Before Developing a Plan to Manage?.”
Legal Compliance
In Australia, the Work Health and Safety Act 2011 says that all businesses must have a system to identify, assess and control risks in the workplace.
If you don’t comply, there can be some pretty serious consequences, including hefty fines, legal action and damage to your company’s reputation.
The Australian Cyber Security Strategy 2023-2030 also highlights the legal implications, particularly in cybersecurity.
Entities handling critical infrastructure or sensitive data have to protect against cyber threats.
If you don’t do this, you could end up facing some pretty hefty penalties.
A risk assessment that’s been properly documented shows that your company is committed to safety and compliance.
It shows you’ve done your homework when it comes to spotting and dealing with potential risks, which protects you from legal issues.
Health and Safety
The study by M. Bernadete Junkes et al. titled “The Importance of Risk Assessment in the Context of Investment Project Management: a Case Study,” shows that small businesses, which often aren’t as prepared for risk assessment, are particularly vulnerable.
Taking a proactive approach to risk management protects your workers and boosts morale and productivity.
It makes your employees feel safe and valued in a workplace that prioritises their health and safety.
So, Junkes and her colleagues say it’s crucial to look at financial records, environmental factors and the experience of partners to spot and deal with risks in a way that’s effective.
Operational Efficiency
The IBM Cost of a Data Breach Report 2024 shows how businesses with solid risk assessment and management processes have fewer operational outages and can bounce back from disruptions more quickly.
Risk assessments can help you spot potential problems that might affect your project schedule and operations.
If you spot these risks early, you can put together a plan to deal with them, so your project stays on track and you avoid any expensive delays.
The research by Junkes et al. shows the value of looking at risks when making investment decisions.
It helps you make more stable choices, allocate your capital better and get the best return on your investment.
The IBM report also says that companies that use AI and automation in their security operations cut their breach costs by an average of USD 2.2 million and made the breach lifecycle much shorter.
Financial Stability
Cost overruns, delays, legal disputes and reputational damage can all have a negative impact on a company’s finances and threaten its financial stability.
The IBM report shows that the global average cost of a data breach has gone up to a whopping USD 4.88 million, which is a 10% increase from last year.
This is mainly down to disruption to business and dealing with the aftermath of the breach.
What’s more, the study by Junkes et al. shows how doing thorough risk assessments helps you make better financial decisions, which means you can get better returns on your investments and keep your cash flow going.
Steps in the Risk Assessment Process
The risk assessment process is a way of identifying, analysing and evaluating potential problems that could affect a project or organisation.
The process typically involves six key steps, each of which is important in building a strong risk management framework.
Step 1: Identify Hazards
The first thing you need to do when you’re assessing risk is to identify any potential hazards that could cause harm.
This means taking a close look at every part of the project or organisation, to make sure nothing is overlooked.
In the AEC industry, this could mean looking closely at things like the design and materials, construction methods, equipment used, and even the work environment itself.
The Australian Cyber Security Strategy 2023-2030 by the Australia Government says it’s important to identify ‘datasets of national significance’ so we can assess their vulnerabilities and put the right data protection measures in place.
Similarly, in the world of cybersecurity, as the IBM report shows, it’s important to spot potential threats like phishing attacks, stolen credentials, or even system vulnerabilities.
Step 2: Determine Who Might Be Harmed and How
Once we’ve spotted the potential hazards, the next thing we need to do is think about who might be affected and how.
This includes employees, contractors, visitors and even the public.
Let’s look at the Junkes et al. case study as an example. In the Banco da Amazonia case study, the evaluators looked at how financial risks could affect different stakeholders, including project promoters and financial institutions.
So, Junkes and colleagues make a good point about understanding who’s involved and what impact it could have on them.
In the event of a data breach, it’s crucial to determine whether customer PII, intellectual property, or other sensitive data has been exposed.
Step 3: Evaluate the Risks
The next step is to look at the risks involved with each hazard that we’ve identified.
This means thinking about how likely it is that the hazard will happen and how serious the potential harm could be.
The Australian Cyber Security Strategy 2023-2030 talks about assessing the impact if critical government systems were disrupted, showing that it’s important to understand what could happen if a risk event occurs.
Junkes et al. talk about using different financial indicators, like Net Present Value (NPV) and Internal Rate of Return (IRR), to assess the financial risks of investment projects.
The IBM report also shows that data breaches involving shadow data, or unmanaged data, cost 16% more. This shows how important it is to evaluate the risks associated with different data storage locations.
A proper risk evaluation helps you figure out which risks are the most important and allocate resources accordingly.
Step 4: Decide on Control Measures
Once we’ve looked at the risks, the next thing to do is decide on the best ways to deal with them. This could involve a range of actions, such as:
- Modifying work processes
- Providing personal protective equipment (PPE)
- Implementing engineering controls
- Investing in cybersecurity solutions like AI and automation.
The Junkes et al., study shows that the Banco da Amazônia S.A. sometimes sends proposals back to clients for reformulation to reduce risks.
This goes to show how important it is to implement effective control measures.
The best way to choose control measures is to think about the nature of the risk, how it could affect us, and what resources we have available.
As a helpful pointer, you can review the section on Google EMM in “The Purpose of IT Risk Assessment: Business Data is Your Peace of Mind.”
Step 5: Record Your Findings
It’s essential to document the findings of the risk assessment to ensure transparency and accountability.
This means you need to record the hazards you’ve identified, the risks you’ve evaluated and the control measures you’ve put in place.
This documentation is proof of your due diligence and can be really useful for future reference or audits.
The Australian Cyber Security Strategy 2023-2030 says it’s important to keep risk assessments up to date and well documented so that companies can show they’re committed to safety and compliance.
Good documentation also makes it easier to review and update things, so the risk management framework stays effective and relevant.
Step 6: Review and Update the Assessment
Please always remember that risk assessments aren’t set in stone. They need to be reviewed and updated regularly.
The business world is always changing, new technologies are emerging all the time and we can learn a lot from previous incidents.
This means we need to keep reviewing our processes on an ongoing basis.
The study by Junkes et al. shows that the Banco da Amazônia S.A. has been improving its risk management methods since 2013, which goes to show how important it is to adapt to changes in the business environment.
The Australian Cyber Security Strategy 2023-2030 also says it’s important to be flexible when it comes to risk management.
This is so you can adapt to changes in the geopolitical landscape, threat environment and technology trends.
It’s important to review and update the risk assessment regularly to make sure it’s still relevant and effective.
How You Can Develop an IT Risk Assessment Policy with a Support System?
With cybersecurity threats being so complex and ever-changing, it’s tough for many companies to put together a solid IT risk assessment policy.
This is made worse by a lack of resources and expertise.
That’s where we at Interscale come in. We help you make sense of the regulations, spot the critical risks and decide what’s most important. So, how do we do that?
We’ll work closely with you to get to know your business and develop a cybersecurity strategy that’s right for you.
We also run training programmes to give your employees the knowledge and skills they need to identify and respond to cyber threats proactively.
For instance, we’ve helped Davey Water Products tackle some pretty big cybersecurity issues, keeping their systems and data safe.
To get a taste of how we can help, we encourage you to explore our Interscale Cybersecurity Services page for more information.
Or, maybe you are ready for a coffee and croissants? Our team would love to catch up with you.
Let’s arrange a one-on-one meeting so we can chat through your specific risk assessment issues. We’ll show you how Interscale can be your go-to for all things IT risk assessment.
In Closing
Because risk is always present, it’s important to keep assessing it. This way, you can deal with new challenges and ensure the project’s success.
Taking a proactive approach to risk management is the best way to protect your project, your team and your company’s reputation.
So, why is it important to have a risk assessment? Because your data, systems and workers deserve a safe and healthy working environment.
