The world is a risky place. Some of those risks are beyond a company’s control, while others are very much within your control – but either way, risk and compliance managers need to keep track of them all.
For example, say you are migrating your business to Salesforce, one of the largest, cloud-based customer relationship management (CRM) platforms in the world. That’s a project with a lot of moving parts and tight deadlines, and it calls for sophisticated project management to assure business continuity during the migration. You put together a project plan and you try your best to identify risks associated with the migration, while you brief your migration team members on a regular basis.
How do you keep track of it all? This is where a project risk register can help.
A risk register is essentially a spreadsheet that uses risk analysis to identify and track the potential risks associated with a project; and then ranks these risks by how likely they are to occur and the potential harm they would have on your project. A well-developed risk register also includes risk response plans, and spells out contingency plans or other mitigation steps that may be needed during the project life cycle.
Moreover, a risk register will help you track and rate risks so you don’t go into the next project blind. When done correctly, and in such a manner that it applies to your specific area of business, a risk register is a powerful management tool.
How do you Create a Risk Register?
A risk register is a risk analysis mechanism that helps you focus on the highest (and most expensive) risk as you work through your project.
You can build your own using an Excel spreadsheet, or you can download any number of risk register templates from the internet.
It’s important to keep in mind that all registers are not created equal, because the possible risks vary from business to business. The risk register for a financial institution, for example, will look very different from the risk register created for a mining business. But the outline or basic matrix for a risk register is the same no matter which business you are in.
Here are some basic risk register categories to consider:
- Risk identification is usually an identification number that may also be a code for a certain group of risks.
- Risk breakdown structure is closely connected to the risk identification number as it lets you sort project risks into different categories, such as hardware issues, data flow issues, etc.
- Risk description is the where, when, why and how that explains how this potential risk may play out.
- Risk category classifies the type of disruption a risk could cause: budgetary impact, project deadline impact, litigation exposure, compliance failure, and so forth.
- Risk analysis seeks to determine the chance of a specific risk and the impact it may cause. Risk analysis is usually divided into qualitative and quantitative risk analysis. Quantitative risk analysis is based on something measurable (say, the number of customer files you have successfully migrated to a new system), where qualitative risk analysis is more subjective, based on something you know about the project you are working on.
- Risk probability is broken out into its own subset once you have determined through risk analysis how likely it is that you will be facing a particular risk.
- Risk priority or risk rating determines what you tackle first. The easiest way to keep track of this part of the risk management process is to assign the highest urgency to the most likely and most costly risk incident. A risk log that is updated in real-time throughout the project duration will help you make sure that you are mitigating the right risk at any given time.
- Risk ownership clearly defines who is responsible for a risk and the processes used to keep that risk in check.
- Risk response is the mitigation plan connected to each identified risk.
How Does a Risk Register Differ From a Risk Assessment?
You may be familiar with a risk assessment matrix, which is a visual representation of the risk analysis that is part of your ongoing risk management program.
Risk assessment, on the other hand, is the careful analysis of each identified risk in a manner that allows you to rate potential risks and plan for the mitigation.
The risk register pulls those two things together in one location.
What Are the Benefits of a Risk Register?
The biggest benefit of a real-time risk register is that it allows you to track risks in an easy and comprehensive manner. As part of your risk management plan, the risk register makes it easy to communicate with stakeholders and share your action plan, should you encounter any disruptions.
Cybersecurity standards such as ISO 27001 require a company to be able to show that it can identify cybersecurity risks and has a plan for how to mitigate any cyber incidents.
Let’s look at the Salesforce migration example we mentioned earlier, and how a risk register can be helpful for a project like that:
- The register is a centrally located risk management tool that’s accessible by the entire project management team.
- It assigns ownership of each risk, so everyone can immediately see who’s responsible for mitigation.
- Cyber problems such as malware invasions and data breaches are easier to mitigate or avoid, if they have already been identified as potential risks to your data migration project.
- It is cost-effective as everyone’s roles and responsibilities are spelled out prior to any risk event actually happening.
- It shows you where to spend your resources. For instance, a lack of cybersecurity increases the risk for a cyber attack and the severity of the attack.
- It shows that your company can demonstrate compliance with regulations and laws.
In short, not only does a risk register allow you to identify and track potential risks. It also shows your customers and regulators that you have a plan for how you will mitigate these risks. Risk management can get very expensive without one.
Creating a Risk Register Based on Industry
Numerous risk register templates are available from online sources, both government and private. If you are tasked with creating a risk register for your business, it’s a good idea to first contact any trade organizations you may belong to. They are likely to be able to put you on the right track.
To give you an idea as to how different risk registers may look, let’s take a look at some of the risks to consider when managing a large scale construction project and then compare them to a similar list for a financial institution.
Construction project risks:
- Air pollution from gasoline powered equipment creates a larger environmental impact than expected.
- Construction storage areas are too small.
- Fire risks stemming from construction techniques such as welding.
- Multiple change requests submitted by the owner or architect delay progress.
- The project interferes with protected habitat such as riverbanks or bird habitat.
- Unexpected price increases for raw materials such as steel or concrete.
- Subcontractor delays or supply chain delays.
Financial institution risks:
- Damage to the company reputation as a result of failed investment advice.
- Cybercrime and data breaches.
- Economic slowdown in a geographical region such as Europe or China; or in an industry sector like mining or manufacturing.
- Regulatory and political changes.
- Failure to retain talent because salaries are not competitive.
- Third-party liability.
As you can see, the risks are quite different, but the risk management methodology is the same.
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Worry-free risk management is the Zen way. For more information on how ZenGRC can enable your CMS, contact us for a free demo.