The 4 Steps for Completing Your Risk Register

If only we lived in a perfect world where productivity would consistently grow over time with no concern for problems, delays, and hiccups. Unfortunately, we don’t live in a perfect world, and any business or project is prone to many issues.

While you can’t anticipate every roadblock in your path to success, the best businesses and project managers always prepare for the worst and look for solutions to problems that haven’t yet surfaced.

The best way to account for these problems and create lasting solutions is to use a risk register.

Overview: What is a risk register?

A risk register, or risk log, is a tool that project managers use to identify and track risks and assess their likelihood. They then decide who will deal with these risks and make a remediation plan.

The risk register is the premier tool used in risk management, a core component of project quality management.

Your risk register might live on a spreadsheet, or you can use kanban boards to track them, with these columns:

• Risks
• Risk values
• Risk owners
• Response plans

This risk register is the all-encompassing guide to identify all known risks before heading into a project. It’s a core component of your overall project planning process.

Why should your small business have a risk register?

Running a small business is a risky venture. Larger businesses are risk-prone, but they have the financial padding to absorb larger disruptions. Small businesses operate on thin margins and rely on smaller staffs.

Everything your business does affects your staff and margins in a very profound way, positively or negatively.

So it’s important to prepare your business for pitfalls by creating a risk register. Still not convinced? Then consider these three additional benefits of adopting a risk register for your small business:

1. Identifying risks

The main reason you build a risk register is to identify potential project risks and other business risks. Luck favors the prepared, and a risk register is the perfect project management tool for dealing with these issues.

2. Creating solutions to these risks

Creating your risk register will give you the chance to work out solutions to these risks. You can work through your solutions and improve your procedures.

3. Making a record of when they occur

Your risk register doesn’t just prepare you for the future. It also records your responses to risks as they occur so you can learn from them and create more effective solutions or mitigation efforts for the future.

How to use a risk register

This four step guide will teach you how to assess risks and fill out your register.

Step 1: Identify potential risks

The first step is to identify and list all the potential risks that could delay or derail your project. It will grow over time as you work through your project, but it’s best to list out as many risks as you can before beginning your project.

Tips for identifying potential risks

Don’t assign this to just one person. Follow these tips to gather the largest pool of information possible to fill out your risk register:

• Host a brainstorming session with your team: It’s impossible to think of all project risks on your own. It’s best to bring your team together for a brainstorming meeting so you can incorporate perspectives based on the variety of talents and experiences in the group.
• Evaluate similar projects and case studies: Look for others who’ve conducted similar projects and find out the issues they faced and how they overcame them.

Step 2: Analyze those risks

No two risks are the same so it’s important to rank them, considering the probability and cost of each. Some risks will rank very low, such as your office building collapsing due to an earthquake.

Therefore it might not make the cut in a cost-benefit analysis of your risk register. Other risks, such as budget overages, will rank higher and warrant a response plan. It all comes down to the value assigned to each risk.

How to perform a risk analysis

Rather than offer tips, it will be more helpful to explain the process to conduct a risk analysis. You typically use a score-based system of 1 to 10.

This is the formula for calculating the value of a risk:

Risk Value (RV) = Probability of risk occurrence (P) x Cost of risk (C)

Estimate your probability and cost metrics, either through past project experience, brainstorming sessions with your team, or through evaluating case studies of similar projects.

Say, for example, you’ve estimated a 15% chance of losing power during a week in your building due to ongoing improvements construction. Such an outage might cost you two days of productivity. Calculate the risk value for these outages like this:

0.15 (P) x 2 (C) = 0.30 days (RV)

Now, consider the risk of losing worker productivity. Based on your research and the flu season, you estimate you have a 35% chance of losing someone on your team for a week while they recover. That’s five days of lost productivity. You would calculate like this:

0.35 (P) x 5 (C) = 1.75 days (RV)

The second risk value is higher than the first and should rank higher on your risk register. You’d prioritize the mitigation of lost productivity due to illness over the possibility of losing power in your building based on these figures.

Step 3: Develop individual response plans for each risk

Now that you understand each risk and have ranked them, it’s time to fill out response plans in your risk register. This will serve as a guide to address all issues if they occur and how to mitigate the aftermath.

The four types of response plans

Every risk in your register needs a response plan, not just the largest and most likely. A fully developed response plan uses one of four types of responses to deal with or manage risk:

1. Share the risk: Sharing the risk involves mitigating the effects of a risk by offloading the response to a third party, such as an insurer. This is also known as “risk transfer.” This plan requires little planning on your part but that doesn’t mean you shouldn’t account for it in your register.
2. Control the risk: If you can’t transfer risk responsibility to a third party, it’s best to find other ways to mitigate it. This is the typical response for risks that cannot be prevented through non-action, such as budget and schedule overages. Controlling these risks typically involves padding budgets or scheduling times to accommodate them without causing disruption.
3. Avoid the risk: Sometimes you can avoid certain risks altogether by altering plans and cutting out specific actions or tasks. This response plan is best for risks that represent optional project procedures.
4. Accept the risk: Some risks are unavoidable, so it’s best to accept Murphy’s Law if those risks aren’t detrimental to the success of your project.

Step 4: Assign responsibility to each risk

Every risk response plan requires a party to carry out mitigation or prevention actions. You can’t take on every single issue, nor is it efficient for you to try.

Assigning owners for each risk will help you delegate and streamline the oversight and response procedures, freeing you up to help keep the project on course.

Tips for assigning responsibility for each risk

Risk ownership isn’t for everyone. Select someone you feel can act on their feet and has clear attention to detail. Make their job easier by following these guidelines:

• Clarify all responsibilities: Your risk register should include detailed instructions on how risk owners should handle their situations should the need arise. Not all response plans can fit within spreadsheet cells. If you have to write out a longer guide, either link to those documents in the spreadsheet or leave instructions where to find them.
• Provide proper training: When assigning risk owners, it’s important to run through the response plans with them and train them on any special skills they will need to perform their jobs correctly.

There’s much more to project management than just risk

It’s very important to anticipate problems you could face as a project manager or business owner. And learn all you can on how to improve and implement your execution strategies.

We at The Ascent want to help you realize the full potential of your projects by providing you with resources, such as project management software reviews, best practices, and even the basics of project management. Check out everything we offer.