A risk register is a key tool for recording risks and monitoring the effectiveness of risk management strategies over time. It makes it easy to answer ‘what if’ questions and spot areas where you need to take action. A risk register provides protection across the entire organization (departments and projects) since it’s the backbone of a workable risk management plan.
Fortunately, creating a risk register doesn’t have to be time-consuming. You can create a risk register in as little as 10 steps. So, what is a risk register, and how can you create one in your business? This article covers this and more information on a risk register.
Table of Contents
What is a Risk Register?
A risk register is a tool used in risk management to identify potential risks. It is usually a table that records all identified risks, their possibilities, impacts, and measures to prevent them.
A comprehensive risk register helps control potential setbacks and issues that could derail a project. A risk register is also called a risk log. It can be a dashboard, a spreadsheet, or a form. A risk register provides protection against any unexpected risks.
Why Do Businesses Need to Create a Register?
A risk register is a must-have in all businesses since it gives an overview of all possible risks and potential ways of evading or managing them. It enables regular risk reviewing, thus ensuring that nothing is missed. Moreover, the information on the risk register is paramount when making an action plan.
The risk register also provides the documentation needed in an audit. It also helps business managers identify the risks worth taking and those they should avoid.
Ten Steps to Creating a Risk Register
A risk register provides protection and is uniquely based on the nature and size of your business. The project at hand also determines the nature of the risk register.
Nevertheless, there are some standard features and characteristics in all risk registers. The steps involved when creating a risk register are:
Identify The Risk
Identify the potential risks and give each a name and identification number. The name of the risk can be its actual name, or you can use a coded word for security purposes. The identification number is the unique identifier for the risk, for instance, 001.
Create a Description
Briefly describe the risk and explain why it is a potential issue. State the critical points of the risk in a way that they are easily understood.
Create a Category
A risk category helps you to quickly identify risk. Additionally, it makes it easy to identify different departments handling various risks. Risk categories can include security, budget, schedule, or quality, among others.
State The Risk Likelihood
This section states how likely it is for the mentioned risk to happen. You can divide it into not likely, likely, or very likely. Alternatively, you can set it as high, medium, or low. The likelihood can also be in the form of a number scale where you state the likelihood of the event happening on a scale of 1-5 or out of 100%.
The likelihood of risk is determined by the capacity and resources available in the business to prevent or manage the risks. By looking at the risk likelihood, it is possible to tell which risk should be your priority.
State The Risk Impact
The risk impact is the effect the risk will create on the organization. The impact can be on the employees, customers, finances, stakeholders, or the organization’s overall performance. You can gauge the impact as very low, low, medium, high, or very high.
It is also possible to select the priority risk using the risk impact. You may need to work with colleagues and department heads to state risk impacts and identify the priority.
Identify Risk Triggers
If you are talking about risks that you have experienced in the past, identify what triggered the risks. Even if these risks have never happened before, you can come up with potential risk causes. Identifying risk triggers helps you know what you should avoid to keep off the risks or minimize their impact.
Mitigation
Mitigation is also the response or management plan. You state the solution you intend to use to reduce or stop the risk. Additionally, you mention how the plan you are using will affect the risk impact. If you have a complex project, you may need the input of the whole risk management team to create the mitigation part. Some of the options you may have may include accepting the risk, assuming the risk, or transferring the risk to insurance companies.
Identify The Risk Priority
You can identify your risk priority by looking at the risk impact and likelihood. This is the risk with the highest likelihood and a huge impact. Document risk priority as low, medium, or high. Additionally, if you would love to make your risk register more eye-pleasing using colors, you can use different colors to show priority. For instance, red can show high priority, while green shows a low priority risk.
State The Risk Owners
Risk owners are the individuals in the organization in charge of managing the different risks identified. Having a team in charge of every identified risk helps ensure that no risk is forgotten and later catches you by surprise. Ensure that you mention the risk owner and other team members who could be working under them.
Risk Status
Risk status shows the level of risk mitigation. It is used to identify how far the risk manager or risk management team has gone in reducing or stopping the risk. Risk status can be open, in progress, or closed. You can also make the status more detailed using terms like active, ongoing, on hold, not started, or complete.
Improve Your Risk Management Department Using a Risk Register
Being over-prepared is always better than being caught off-guard. For this reason, if you are yet to get a risk register, create one today using the steps above. The risk log will help avoid surprise risks that can seriously affect your business. Alternatively, download a risk management software, and you will have a risk register template that you will use to manage risks.
