Risk management tools to evaluate your brokerage

Author: Baiana Kashaeva

If you work in a brokerage, you know how critical it is to stay on top of potential risks and manage them in a timely manner.

At TFB, we believe in proactive risk management; that’s why many of our solutions offer tools that help brokers keep their brokerages safe. In today’s article, we would like to share some of the tried and tested tools that have helped countless companies identify and mitigate their risks and build a stronger company that’s immune to the unexpected.

Probability and Impact Matrix

The Probability and Impact Matrix (sometimes called a Risk Reward Matrix) is popular in project management, where risks are abundant and vary largely by their probability and the possibility of impacting the business.

The main goal of the matrix is to categorise the risks and prioritise them. Not every risk is severe and requires immediate attention, even though it sometimes seems otherwise. Our time and energy are limited, so the matrix makes sure we dedicate ourselves to the risks that truly need to be dealt with.

Here is what a Probability and Impact Matrix looks like:

Once the risks are categorised, we can start working on a mitigation and minimisation strategy, beginning with the most critical risks - those with high severity and likelihood.

Root Cause Analysis

Root Cause Analysis, you guessed it, targets the cause rather than the symptom and it is used in cases where the issue (risk) has already happened.

And although we are dealing with an event that has already occurred, the Root Cause Analysis teaches us to understand the nature of the risks better and to have a more analytical rather than emotional response to the situation.

The Root Cause Analysis asks the three core questions:

• What happened?
• How it happened?
• Why it happened?

SWOT analysis

SWOT analysis is probably one of the most widely used business evaluation tools out there.

SWOT stands for strengths, weaknesses, opportunities, and threats. And while it’s not solely focused on risks, it makes a great risk analysis tool.

It is recommended to go through SWOT by starting with strengths and slowly moving toward the weakest parts of the current system.

Risk register

A Risk Register is a more advanced risk management tool that is essentially a library of all identified risks with full descriptions, potential impact, and the planned response for if and when the risk occurs.

Although it might seem like overkill to smaller brokerages, it is a universal resource that is helping catalogue the threats and standardise the process of dealing with them. With the register, risks can be prioritised and even have owners assigned to them. Because the majority of risks are cyclic, risk owners can be tasked with reviewing and updating the register regularly, making sure the chance of the risk is low and taking any steps required to protect the brokerage.

Ishikawa Diagram

The Ishikawa Diagram (also known as the Fishbone diagram or Fishikawa) is a risk management tool that helps identify issues in the system. It was developed by Kaoru Ishikawa in the 1960s.

The diagram visualises the cause-effect relationship and helps to thoroughly analyse the product, the process, or the entire business workflow. It works well for more complicated problems that are not as obvious to brokers, and it is also useful for brainstorming solutions.

The diagram takes a while to create, so if your brokerage is planning on utilising this risk management tool, make sure you block at least a few hours to work on it.

The diagram uses the 6Ms - the six critical factors to identify and analyse issues: manpower, machines, material, mother nature (environment), method, and measurement.

We have a series of risk management articles on our blog, so make sure you check it out and stay tuned for new weekly posts.