Periodic risk assessment: Overview, definition, and example
What is a periodic risk assessment?
A periodic risk assessment is a process where you regularly review the risks that your business faces. These could be financial risks, legal risks, security threats, or anything else that could impact your business operations. The goal is to identify potential problems before they happen and put measures in place to minimize or avoid them. A periodic risk assessment isn’t a one-time event—it’s something you should do on a regular basis to make sure your business stays protected over time.
For example, reviewing your business's cybersecurity every six months to make sure your data is protected is a form of periodic risk assessment.
Why is a periodic risk assessment important?
A periodic risk assessment is important because it helps you identify and manage risks that could affect your business. Risks can change over time, so regularly reviewing them ensures that you’re prepared for new challenges. By identifying potential risks early, you can take steps to protect your business, your employees, and your customers. This proactive approach can help you avoid costly mistakes, legal problems, or damage to your reputation.
For businesses, especially small and medium-sized ones, a periodic risk assessment is a way to stay on top of issues and ensure that your business can continue to grow without unexpected setbacks.
Understanding periodic risk assessment through an example
Imagine your business is expanding, and you want to make sure you're managing the risks of working with new suppliers. A periodic risk assessment might involve reviewing the financial stability of these suppliers every six months, checking their track record for timely deliveries, and making sure they comply with legal regulations. This way, if any supplier begins to show signs of trouble, you can address the issue before it affects your business operations.
In another example, a business that handles customer data may do a periodic risk assessment on its cybersecurity measures every year to ensure that customer information is still secure against the latest online threats.
An example of a periodic risk assessment clause
Here’s how a periodic risk assessment might be mentioned in a business policy:
“The Company will conduct a periodic risk assessment every six months to evaluate potential risks related to cybersecurity, financial stability, and operational procedures. Any identified risks will be addressed by management with updated procedures or policies as necessary.”
Conclusion
A periodic risk assessment is a regular check-up on the potential threats that could harm your business. By assessing risks regularly, you can stay ahead of any problems and protect your business from financial loss, legal issues, or security breaches. It’s a simple but effective way to make sure your business stays strong, safe, and ready to adapt to changes.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.