How SWOT Analysis Helps in Risk Identification

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Running Head: SWOT ANALYSIS AND RISK IDENTIFICATION
SWOT Analysis and Risk Identification
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Institute
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SWOT ANALYSIS AND RISK IDENTIFICATION
How SWOT Analysis Helps in Risk Identification
Risk is composed of two parts the probability or likelihood that something may go wrong
and the consequences if it does go wrong. Risk has to be identified early enough to be able to
prepare and manage it. The failure of an organisation to mitigate risk can result in losses,
incurred costs, time and reputation. This makes a method such as SWOT analysis essential
especially in a line of work that involves risk. SWOT analysis helps in the identification and
understanding of the risks that an organisation will face. This helps in managing and minimising
the impact of the risk.
SWOT analysis is a process that enables the identification of the strengths, weaknesses,
opportunities and threats of an organisation. It is also referred to as internal-external analysis and
is used in the identification of potential risks. Strengths and weakness generally focus on the
internal processes of the organization. Strengths involve the examination of an organisation’s
core competencies, assets, skills, and any other advantages that aid in the achievement of a
project’s objectives or the organisation’s goals. Weaknesses also focus on the organisational
areas that could be improved, the areas that are seen to impede the organisation’s success and the
competencies that may be lacking in the company, business or project. Risks can also be divided
into negative and positive risks. Strengths are associated with positive risks while the weaknesses
of the organisation relate to negative risks.
In SWOT analysis negative risks are considered threats and positive risks are referred to
as opportunities. Opportunities are analysed that may arise from the strengths of the organisation
and any threats to the organisation that may be as a consequence of its weaknesses are also
analysed and identified. Threats and opportunities are considered external conditions or events
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SWOT ANALYSIS AND RISK IDENTIFICATION
that may affect a project or organisation (PMBOK, 2017). For example, an organisation would
focus in the identification of positive risks such as new technology that could help increase
productivity, new markets that they could exploit with their product or service, or how external
vendors can help increase distribution of products. At the same time, it is important to consider
and identify threats that could hinder the operationalization of the organisation and achievement
of project objectives. Threats could be such as environmental factors such as natural disasters or
bad weather. Political factors such as tax change, new policies and changes in regulations, or
public opinion
SWOT in strategic decision making to provide information on projects and their
outcomes. The technique enables management to identify weaknesses that can be improved or
altered and to capitalize on organizational strengths to increase productivity and achieve project
objectives. It is beneficial as it focuses on both the internal and external factors in the mitigation
of risk. It provides a structured approach to the identification of risk. It also helps in focusing on
both positive risks (opportunities) and negative risks (threats).
The disadvantages of using SWOT analysis are that it does not focus on project-specific
risks rather it provides information on generic risks. It also has a low level of accuracy as it is
subjective in nature and reliance is placed on the resources that generated the analysis.
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SWOT ANALYSIS AND RISK IDENTIFICATION
References
PMBOK (2017). A Guide to the Project Management Body of Knowledge. Project Management
Institute.
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