In the day-to-day, most companies don’t think about all the different ways something can go wrong and damage can be caused to their business. Those that do, however, often make use of a risk register. Using risk registers can help save a business everything from lost revenue to wasted time to squandered resources. When used correctly, they can even prevent client loss and reputation damage; two things that can be very difficult to recover once lost.
Yet most don’t know how important they are to the health of their business. Put simply, a risk register is a guide of sorts that is created when a company conducts a risk assessment. A risk assessment is a thorough examination of all the different ways harm could befall a company if they aren’t careful. These assessments should be conducted by every business on a semi-frequent basis, and each assessment should involve creating a risk register, or updating an existing one.
The register serves as a way for businesses to keep track of all possible risks that threaten their company. When created manually, a risk register is built throughout the risk assessment process. The team assigned to carry out the risk assessment should be creating new entries documenting each risk.
Why is a Risk Register Important?
A risk register helps a business monitor and resolve risks that are discovered during the risk assessment process. Without a way to record all the various risks that threaten the business, it’s very possible that some risks may slip past human monitors and end up becoming bigger problems.
By keeping track of every last risk, no matter how small, the supervisors of a business are able to keep a sharp lookout for anything that could threaten it and take action before damage is done. Supervisors can also make other departments aware of risks that they should be watching out for.
Risk registers also allow team members outside the risk assessment team to see what may be threatening the company. While a risk assessment team will end up becoming intimately familiar with what risks can cause harm to the business, those outside the team will remain completely unaware. By creating a register, all team members can see the fruit of the risk assessment and see how they can change their practices to mitigate risks as much as possible.
How is a Risk Register Created?
A risk register can be created one of two ways. It can either be created manually by the risk assessment team, or with the help of a third-party risk management program. Both are beneficial and it is up to the individual businesses to decide what is best for their team.
Manual Risk Registers
These registers can be simple spreadsheets that are filled out as the assessment is being conducted. Information such as the nature of the risk, an identification number to help ID the risk, the likelihood of the risk becoming a real problem and other information should be collected in each register entry.
In addition to being a way for companies to review risks that may threaten them, a register also serves as a guide for lesser risks that can be monitored. This allows a company to prioritize certain risks while others can be safely put on the back burner for the time being.
While most time-sensitive risks will likely be dealt with immediately – and rightfully so – less time-sensitive risks and risks that have a low chance of coming true will be pushed further down the priority list. This is an efficient way of managing risks without wasting resources, manpower or cash. However, it is important that a business keeps its eye on these smaller risks as well. A business that ignores a low-priority risk may not be prepared or may even be caught off-guard if that small risk were to grow and become more of a danger. Manual registers that are easily accessible by most members of a business can ensure that all risks are being monitored and will be caught before they become larger problems.
Third-party Programs
These programs undoubtedly streamline the process and are a viable choice for larger businesses or businesses trying to grow. These programs create a comprehensive directory of vendors and other third parties involved in the business, allowing employees to monitor more closely any and all risks that may be associated with each of them.
However, a risk management program can do far more than just recognizing risks. These types of programs are also useful when it comes to selecting new vendors, vetting existing vendors and other third parties and provide analytics so that businesses can see the latest trends in risk management and what they can do to further protect themselves.
On top of this, vendor risk management software often comes with the ability to automate ongoing risk management to minimize manpower spent on this. While manual monitoring of risks often requires additional work from team members – allowing things to sometimes slip through the cracks – automated monitoring allows the program’s digital eyes to do all the heavy lifting. Audits, additional risk assessments and other business practices that require taking people away from their daily work can also be automated through these programs.
These types of risk management programs also come jam-packed with supplemental tools that can keep a business running smoothly while also minimizing the creation of new risks. Onboarding new contractors, vendors and other long-term third-party teams that will be with the company is typically included in these risk management programs.
To conclude, the importance of a risk register shouldn’t be underestimated. Whether created manually by the risk assessment team or created through a risk management program, a risk register is important in keeping a business afloat and avoiding preventable harm. Should a business allow risks to go undetected, the effects could end up being expensive and catastrophic. The best way to handle a risk is prevention, and the best way to prevent risks is by conducting a thorough risk assessment and creating a register.
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