Organizations may have many projects to achieve their goals. However, these projects carry risks that may affect their success, resulting in loss to the organizational resources.
You must be prepared to deal with such risks, and a risk register is a great help here. A risk register is the most important project management document in risk management.
You cannot avoid or eliminate all risks, but you can manage risks using risk management.
A risk register provides all information on project risks, allowing you to make informed decisions on managing risks.
A risk register contains risk information to help you plan responses and monitor and control risks. It provides detailed risk analysis, including the probability of occurrence, impact, and ranking. You can also add more details required by the project complexity, such as qualitative analysis, response plan, risk owner, and risk updates.
Many jurisdictions require risk registers as a transparency tool to protect the interests of investors.
A risk register provides you with overall project risk, allowing you to make better decisions.
It allows you to formulate responses to manage risks. A risk register provides organized data to analyze risks rather than guessing risks on the fly.
When Should You Use a Risk Register?
You should use a risk register on all projects, regardless of their size or complexity. It is an integral part of risk management.
A risk register can have basic information for smaller projects, such as the list of risks, risk ranking, likelihood of occurrence, risk response, risk owner, and watch list.
Large and complex projects can have more details, including risk category, description, impact, probability, risk rating, mitigation measures, risk ownership, risk status, residual risk, etc.
Risks can be ranked by priority, which is outlined below.
Low-level Risks: These risks have a low impact on your project and its objectives. These risks are not likely to result in failure, harm, injury, etc. You can keep them under the watch list for monitoring.
Medium-level Risks: These risks can affect your project objective, and you have to monitor them regularly and keep a close watch.
Critical Risks: These risks are high-priority risks and can severely affect your project, so you will watch them closely.
A risk register can help you identify risk patterns and formulate strategies to deal with such patterns for future projects. It is a vital part of your organizational process assets.
Do not forget to include positive risks. You can use a risk register to take advantage of opportunities while reducing the impact of threats.
Common Risk Scenarios
A project faces many risks, including internal and external risks.
External risks can be political conditions, supply chain, operational, IT/cybersecurity, finance, investment, security, legal, strategic, regulatory, market, natural disasters, cyber security, IP theft, etc.
Internal risks can be equipment malfunction, team members leaving the team, schedule delay, cost overrun, etc.
If your project is in a natural disaster-prone area, you need to be careful. You cannot control these risks, and the impacts are devastating.
Miscommunication can affect projects and can cause scope creep.
If delays go unnoticed, they can affect your milestones and deadlines. Schedule delays can cause rushed deliverables and team confusion. A proper schedule helps keep the project on track and results in on-time deliveries.
In many cases, the project misses the scope. This risk can be mitigated if appropriately tracked. Without a proper RACI matrix, you cannot track deliverables to concerned stakeholders. Ensure your project has one responsibility assignment matrix.
Projects with a massive inventory have a risk of theft or reporting errors. Theft can leave your business open to loss of revenue, uncertainty, and misuse of time. Ensure that your project materials and consumables are safe, secure, and well recorded.
What’s Included in a Risk Register?
A risk register can include the following elements:
- Risk Category: This is the specific risk category; it includes internal or external risks such as finance, legal, supply chain, natural disasters, operational risks, and project-specific risks. This grouping provides risk clustering, letting project managers reasonably guess these risks.
- Risk Structure ID: Every risk is assigned a unique identification number for tracking.
- Risk Description: This is a brief explanation of the risk, what the risk comprises, and how the risk will affect the project objective, etc.
- Risk Impact: This shows the potential effects of the risk on the organization’s operations or the project’s success.
- Risk Probability: This is the likelihood of the risk occurring. Risk probabilities range from most likely, likely, and not likely.
- Risk Ranking: You multiply risk impact by the probability. The higher the number, the higher the risk ranking.
- Risk Consequence: This involves the consequences of the risk occurring.
- Risk Scale/Exposure Rating: The risk exposure or risk rating is obtained by combining the risk probability with the risk impact. The risk exposure is an overall risk of a project or an organization.
- Risk Trigger: This lets you know if a risk is about to occur. It is crucial to identify the triggers of risks to stop one before it becomes an issue.
- Risk Priority: The risk priority is determined by multiplying the risk impact and probability values.
Risk Response Plan
These are the actions to reduce, prevent, or eliminate risk. A risk response plan comprises a step-by-step plan on how to handle risk. The complexity of the response plan depends on the severity of the risk.
Typical risk management planning includes identifying, analyzing, planning a response, monitoring, and controlling the risk. Types of responses include accepting, transferring, mitigating, avoiding, and escalating.
- Contingency Plan: This plan is to reduce the impact of the risk once it occurs.
- Risk Owner: This is the person assigned to manage the risk. The risk owner is tasked with managing and executing the mitigation measures against the specific risk assigned.
- Risk Status: This is the status at a particular moment. A risk’s status can be ongoing, open, or closed. Risk statuses are important in monitoring risks, as they help determine higher priority risks.
- Residual Risk: Even after controlling, monitoring, and managing risks, there will always be some level of risk that cannot be completely reduced. Such risks can be recorded in this category for continued monitoring.
- Secondary Risk: This risk is caused due to the response to a primary risk.
You can also add two additional fields: timeline to show the periods when various risk register items were created and executed; and response type, which can be positive or negative depending on the risk analysis.
How to Create a Risk Register
Let’s look at an example of mitigating natural disaster risks.
Identify project risks and assign them their class, type, name, and identification number. You should involve all project stakeholders and subject matter experts to collect the risks.
For example, since you are in a disaster-prone area, you might want to know the prevalence of storms, floods, or heat waves in your region.
Describe the risk with possible impact.
For example, a flood might cause the closure of major highways, resulting in supply and delivery delays, which might impact the firm’s revenue.
Estimate the Impact
Estimate the impact of the risk.
For example, if a flood occurs, this means the closure of business facilities and a loss of revenue. A flood can delay business plans due to the disruption of business operations.
Once you have recorded all the risks, it is crucial to organize them according to their priority. The most important has the highest priority, and the least important has the lowest priority.
Floods have a high priority as they can destroy the whole organization. This means you should regularly monitor such a risk before it presents a danger to the organization.
Plan Risk Responses
Developing a response plan is a crucial step. In this case, a flood can be monitored through constant weather monitoring to ensure no warning signs occur during business hours, such as strong winds or heavy clouds.
For such a risk, avoidance measures are the most appropriate and involve evacuating all organizational personnel out of business premises before the flood happens, along with sensitive equipment. This reduces damage, enabling the business to resume operations much faster.
The best risk response strategy for flood is to avoid; however, invest in insurance if it is not possible.
Determine Risk Owners
You can delegate risk management tasks to risk owners for better control.
The flood risk owner should ensure constant flood monitoring, reporting, and avoidance measures.
Risk Register Example
A risk register is a key project document for any project. It lets you organize risk information and allows management to make better-informed decisions that influence the success of an organization.
Therefore, you should start developing the risk register from day one of the projects and keep it updated and current to get the most out of it.
How does the risk register help in your project? Please share your thoughts through the comments section.