Risk Registers in Operations Management

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  • 0:03 What Is a Risk Register?
  • 1:26 Why Create a Risk Register?
  • 2:11 Formulation of the…
  • 2:41 Analysis of the Risk Register
  • 4:41 Lesson Summary
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Lesson Transcript
Instructor: Christian George

Christian has a PhD in Business Management and an MA in Accounting & Financial Management

This lesson discusses what a risk register is and why companies create a risk register as part of the risk management plan. You'll also see a sample register and analyze the parts of the register.

What Is a Risk Register?

When a business begins a project, there have been many hours spent beforehand creating and planning the project, identifying risks, preparing the allocation of resources and planning for ongoing monitoring and evaluation of the project. Many tools are available to management to help with this daunting process as the business prepares to begin the project. One of the most important areas concerning project planning is risk management.

One of the tools available to management to help identify, plan for and manage risks is the risk register. The risk register lists all of the identified risks at the beginning of the project and makes periodic evaluations to update the register during the life of the project. The register also include a grading of risks to determine likelihood of occurrence and the severity of the impact on the project.

A risk register also usually includes a unique identifier for each risk identified, a description of the risk and its effect on the project, an assessment of the likelihood and the severity of impact on the project, a grading of each risk, the responsibility of management of the risk and proposed mitigation actions, both preventative and contingency. Regular evaluation of the register and timely modifications to existing risks as well as the addition of new risks is vital to the long-term success of the project.

Why Create a Risk Register?

The creation of a risk register isn't a requirement of project planning, but it's an important tool that is used by management to manage and reduce the risks that are identified prior to the start of the project. Management is also able to document the risks, the likelihood of occurrence and the severity of impact for use in future projects, as well as to act as a benchmark for those future projects. Management is also able to provide a framework of risk management to senior executives and other interested parties.

An additional reason for management to create a risk register is because stakeholders need to know what the company is doing to identify and mitigate risks in the business. This allows key stakeholders to provide feedback, which is then incorporated into the evaluation loop of the risk management plan.

Formulation of the Risk Register

When it's time to create and implement a risk register in the project plan, key areas that pose a potential risk should be evaluated by management for inclusion. These areas include:

  • Technology
  • Financial
  • Market demand
  • Organizational
  • Governmental
  • Legal
  • Safety

The best method to determine what the potential risks are and how to classify them on the risk register is to create a risk register. This chart shows an example of a risk register:

Risk Risk Description Pre-Mitigation Probability Post-Mitigation Probability Current Risk Category Mitigation Technique
Computer problems Technology 5 2 High Ensure tech support coverage and proper software usage
Shortage of capital Financial 3 1 Medium Check capital allocations to project and contingency reserves
Customer changes plans Market Demand 2 1 Low Continual customer service coverage
Employee sickness Organizational 3 2 Medium Additional employee preparation for coverage of sick employees
Code requirements Government 2 1 Low Double check code requirements and other planning requirements
Lawsuit by other parties Legal 2 1 Low Legal department coverage
Accidents on job Safety 4 2 High Constant safety checks with equipment and personnel; safety training

Analysis of Risk Register

Okay, now let's analyze the chart in order to help us fully understand risk registers and their importance.

Risk #1 involves computer problems. Someone's computer goes down and they need it to work on the project. The pre-mitigation probability is high because the likelihood of it occurring is very probable and the post-mitigation probability is still low-medium because the change of reoccurrence is still likely.

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