What Is the Purpose of Risk Assessment?

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The primary purpose of risk assessment is to evaluate the consequences if a business investment or action fails. Company leaders typically want to avoid new investments or projects when the threats are catastrophic or when they outweigh potential rewards, according to PricewaterhouseCoopers.

Risk assessment is typically conducted using a statistical analysis software program. The goal is to analyze the risks and rewards of a decision using data. Statistics risk assessment reduces the need for hunches. PricewaterhouseCoopers indicates that company leaders tend to accept higher levels of risk when economic conditions are strong. They also take risks when they have extra resources and the negative consequences of failure are modest.