All projects and companies are subject to operational risks. It is up to you to anticipate, prevent and mitigate these issues by using a risk register.
If only we lived in a perfect world where productivity would steadily increase over time without having to worry about problems, lags and hiccups. Unfortunately, we don’t live in a perfect world and every business or project is prone to many problems.
Even if you can’t anticipate every hurdle on your way to success, the best companies and project managers always prepare for the worst and look for solutions to problems that haven’t yet arisen.
The best way to address these issues 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 project managers use to identify and track risks and estimate their likelihood. You then decide who will deal with those risks and create a remediation plan.
The risk register is the main risk management tool, a core component of project quality management.
Your risk register can be stored in a spreadsheet, or you can use Kanban boards to track it with these columns:
- risk values
- risk holder
- response plans
This Risk Register is the all-encompassing guide to identifying all known risks before starting a project. It is 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 endeavor. Larger companies are risk-prone, but they have the financial cushion to weather larger disruptions. Small businesses operate on tight margins and rely on smaller employees.
Everything your company does affects your employees and margins in very profound ways, positively or negatively.
It is therefore important to prepare your company for pitfalls by creating a risk register. Still not convinced? Then consider these three additional benefits of implementing a risk registry for your small business:
1. Identify risks
The main reason for creating 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. Create solutions for these risks
The creation of your risk register gives you the opportunity to work out solutions for these risks. You can work through your solutions and improve your processes.
3. Keep records of when they occur
Your risk register not only prepares you for the future. It also records your responses to risks as they arise so you can learn from them and develop more effective solutions or mitigation efforts going forward.
How to use a risk register
This four-step guide will show you how to assess risk and complete your register.
Step 1: Identify potential risks
The first step is to identify and list all the potential risks that could delay or cause your project to fail. It will grow over time as you work through your project, but it’s best to list as many risks as possible before beginning your project.
Tips for identifying potential risks
Don’t just assign this to one person. Follow these tips to gather the largest possible pool of information to fill out your risk register:
- Host a brainstorming session with your team: It is impossible to think of all project risks alone. It’s best to bring your team together for a brainstorming meeting so you can bring perspectives based on the diversity of talent and experience in the group.
- Rate similar projects and case studies: Find others who have done similar projects and find out what problems 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 by considering their likelihood and cost. Some risks are classified as very low, e.g. B. the collapse of your office building due to an earthquake.
Therefore, in a cost-benefit analysis of your risk register, it may not be the cut. Other risks, such as budget overruns, are ranked higher and warrant a response plan. It depends on the value assigned to each risk.
How to do a risk analysis
Rather than giving tips, it is more helpful to explain the process of conducting a risk analysis. They usually use a points based system from 1 to 10.
This is the formula for calculating the risk value:
Risk value (RV) = risk probability (P) x risk cost (C)
Estimate your likelihood and cost metrics, either through previous project experience, brainstorming sessions with your team, or by evaluating case studies of similar projects.
For example, let’s say you have estimated a 15% chance that your building will lose power for a week due to ongoing building improvements. Such a failure can cost you two days of productivity. Calculate the risk value for these failures as follows:
0.15 (P) x 2 (C) = 0.30 days (RV)
Now consider the risk of losing employee productivity. Based on your research and the flu season, you estimate that 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 in your risk register. Based on these numbers, you would prioritize mitigating lost productivity due to illness over the possibility of a power outage in your building.
Step 3: Develop individual response plans for each risk
Now that you understand and categorize each risk, it’s time to fill out response plans in your risk register. This serves as a guide to solving any problems should they arise and how to mitigate the consequences.
The four types of response plans
Every risk in your registry needs a response plan, not just the biggest and most likely one. A fully developed response plan uses one of four types of responses to deal with or manage risk:
- Share the risk: Risk sharing means mitigating the impact of a risk by sharing the response with a third party, e.g. B. an insurer is transferred. This is also referred to as “risk transfer”. This plan requires little planning on your part, but that doesn’t mean you shouldn’t consider it in your registry.
- Control the risk: If you can’t delegate risk responsibility to a third party, it’s best to find other ways to mitigate it. This is the typical reaction to risks that cannot be avoided by inaction, such as budget and schedule overruns. Controlling these risks usually involves padding budgets or setting aside time to address them without disruption.
- Avoid the risk: Sometimes you can avoid certain risks altogether by changing plans and skipping certain actions or tasks. This response plan is best suited for risks that are optional project procedures.
- Accept the risk: Some risks are unavoidable, so it’s best to accept Murphy’s Law if those risks don’t affect the success of your project.
Step 4: Assign responsibility for each risk
Any risk response plan requires that a party implement mitigation or prevention actions. You cannot take on every single problem, nor is it efficient to try.
Assigning ownership for each risk helps you delegate and streamline oversight and response procedures, giving you more time to keep the project on track.
Tips for assigning responsibility for each risk
Risk responsibility is not for everyone. Pick someone who you believe can be on their feet and has a clear attention to detail. Make your job easier by following these guidelines:
- Clarify all responsibilities: Your risk register should include detailed instructions on how risk owners should manage their situation, should that be necessary. Not all reaction plans fit in table cells. If you need to write a longer guide, either link to those documents in the table or leave instructions on where to find them.
- Provide adequate training: When assigning risk officers, it is important to go through the response plans with them and train them on any specific skills they need to perform their duties correctly.
Project management is much more than just risk
It is very important to anticipate problems you might face as a project manager or business owner. And learn everything you can to improve and implement your execution strategies.
At The Ascent, we want to help you realize the full potential of your projects by providing you with resources such as: B. Project management software reviews, best practices, and even project management basics. Check out everything we offer.