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Enhancing decision making: The value of risk registers

Risk registers enable organisations to identify, assess, and manage risks effectively. Here’s some best practice for implementing yours.

In the fast-paced world of corporate leadership, making informed decisions is paramount to achieving sustainable success.

One tool that empowers leaders to navigate uncertainties with confidence is a risk register. This is a key document used to undertake an effective risk management process. They serve as a strategic compass to enable an organisation to identify, assess, and manage risks effectively.

What is a risk register?

A risk register is a systematic and structured tool that provides organisations with a holistic view of potential risks. It’s a repository that documents risks, their potential impact, likelihood of occurrence, and mitigation strategies. This structured approach empowers senior leaders to proactively address risks, rather than merely react to crises.

What risks are included?

According to the International Organisation for Standardisation (ISO)’s Risk management 31000, risk is defined as: the “effect of uncertainty on objectives.”

When we think about risk, we often focus on the negative elements of it. But really, risk is any kind of uncertainty — positive or negative — that can have an effect on an organisation’s objectives. Those objectives, for example, could be to do with increasing sales, rolling out a new product, buying a new warehouse or merging with a competitor.

Risks areas facing organisations of late include:

  • Pandemic risks (COVID-19)
  • Customer safety risks (health and safety)
  • People risks (staff shortages, for example)
  • Environmental risks
  • Fraud risks
  • Physical risks (fire, floods, for instance)
  • Financial risks

What value does a risk register bring?

  1. Risks can be identified and mitigated: Risk registers foster a proactive approach to risk management by identifying mitigation or prevention strategies for emerging risks once they are identified. By cataloguing risks and assessing their potential impact early on, the register allows for the implantation of timely and effective mitigation strategies.
  2. Informed decision making: Informed decisions are a cornerstone of successful leadership. A comprehensive risk register equips an organisation with valuable insights into the potential risks associated with various initiatives. This prompts action and enables leaders to make informed choices that balance potential rewards with potential risks.
  3. Resource allocation: An organisation’s resources, whether financial, human, or technological, are finite. Risk registers help an organisation allocate resources judiciously by highlighting where resources might be most needed due to higher risk exposure or lower risk appetite. This can help to ensure that resources are channelled where they can yield the greatest impact while minimising potential losses.
  4. Enhanced communication and collaboration: Risk registers facilitate transparent communication across organisational levels. Registers can be used as a source of information to communicate risk profiles to stakeholders — both internal and external (such as insurers) — fostering a shared understanding of potential challenges and the measures in place to address them. This transparency encourages collaboration and alignment — a risk-aware organisation is more likely to manage risks effectively. Enhanced transparency also helps promote the tracking of actions, as more engaged stakeholders will want to be updated.
  5. Strategic planning and adaptation: Long-term strategic planning requires a thorough understanding of potential roadblocks. Risk registers should be an essential document to review when senior leaders are undertaking strategic planning. The risk register can assist leaders in aligning strategic goals with risk profiles, making it possible to proactively adapt strategies as the risk landscape evolves.

How are risk registers presented?

Excel is the most common method of having and maintaining risk registers. Some organisations use PowerPoint or Word. Others, if resources allow, will have a dedicated Risk Management Information System (RMIS).

Best practices for implementing effective risk registers

  1. Comprehensive risk identification: Involving internal stakeholders from various departments who may have different methods can ensure a comprehensive identification of risks across an organisation. External stakeholders, such as a broker, can also be engaged to provide a more expansive view of risks.
  2. Standardised assessment criteria: Developing standardised criteria for assessing the impact and likelihood of risks improves the accuracy of risk evaluation and the ease of comparing different risk types.
  3. Regular updates: Risks evolve, and new ones emerge. As such, the risk register should be regularly updated to reflect the changing business environment.
  4. Mitigation strategies: For each identified risk, clear mitigation strategies should be outlined and responsibility assigned for their execution. External risk management support could add a lot of value here. Marsh, for example, provides actionable insights, powered by industry-leading data, to support informed risk management decisions.
  5. Integrating a risk register in decision making: Embedding the use of risk registers into decision-making processes can ensure that risk assessment is a fundamental aspect of strategic choices.

Embrace the power of risk registers

Risk registers can certainly help steer an organisation towards a future marked by resilience and strategic advantage — if used effectively and not just completed as a tick box exercise. Used well, they can be a key part of an effective risk management process.