Financial Impact of Risk

Understanding the financial impact of risk is paramount to effective risk management within the context of a risk register. The intricate relationship between identified risks and their potential financial impact is examined, including how these risks can influence budgets, resource allocation, and overall project costs.

Finance and budgets are often key requirements for mitigating risks. TrustRegister connects businesses to risk management. Determine the potential financial impact of risk along with your allocated and requested budget to showcase the business impact that risk has.

The following screenshot shows the financial impact of a particular risk.

The values used here can be viewed via the overview page of the budget analysis dashboard.

How to estimate the Financial Impact of Risk:

We recommend the following high-level approach for determining the range of impact. Assuming a risk was realized, i.e., the risk took place, what would be the primary and secondary impacts of that risk? Adding those two values will provide you with a high-level estimate of what the impact could look like.

Items that are considered a primary loss:

1. Direct financial payments or loss
2. Loss of business due to disruption in services
3. Cancellation of future deals and changes in market share
4. Repair and remediation costs for responding to incidents
5. Regulatory Fines and payouts
6. Public relations and reputation damage costs, including valuations and stocks

Items that are considered secondary losses:

1. Legal and consulting costs
2. Increased cyber coverage, capital costs, and insurance
3. Employee retraining and restructuring costs
4. Lost productivity and morale due to a risky incident

A range is ideal, as determining exact values can be challenging. Please reach out to us if you need help calculating the financial impact of your risks.

To learn more about TrustRegister, click here!