Storm Proof Your Projects: Create a Risk Register

A Storm is Coming

Red Alert! Red Alert! Batten Down the Hatches! 

Wait a minute, “where is the storm?” you may ask. Great question. Storms are always near and ever present. Learn how to prepare for the worst now so you can perform at your best. 

What is a Risk Register?

A risk register is a tool to help consolidate a list of threats to your business. These threats may be internal (e.g., employee strikes, damaged supplies, etc.) or external (e.g., rival business taking more of your market share, earthquakes, etc.) Sticking your head into the sand will not change their reality, but planning for them is your best mitigation tactic. Creating a risk register is a project management tool where you itemize and group each risk, assess its likelihood, and provide a solution. This same technique can be used for your business. Your business will have many new projects, and for each project, you need to assess potential risks.  

How to Create a Risk Register

To illustrate this concept, let’s pretend that we are event planners. Our new client Susan asked us to coordinate a birthday party for her grandmother. Grandma Bertha is 99, is in good health and her 100th birthday is coming soon. Susan and her family want to celebrate Grandma Bertha’s upcoming birthday. Susan wants to host the event at her mansion. Because this is a family celebration, she wants her relatives' children to be able to swim in her pool. In the months prior to the event, we coordinate with Susan to create a risk register. To create the risk register, we need to collect the following information:

  1. Assess all potential threats to the success of the party. Below is a list of potential threats. 
    • Grandma dies. Even though she just completed the Boston Marathon, grandma succumbs to old age and dies.
    • The pool does not work. There is not enough chlorine or other chemicals available to sanitize the pool. 
    • Heavy Rains. Heavy rains prevent guests from enjoying any outdoor activities, which include using the pool. 
    • Family Dramas. Susan has much drama in her family. Her uncles Bob and Harry are fighting again over that old loan and may cause a disruption at the event. She also worries that the Henley cousins will drink too much and cause a commotion. Either way, there are potential conflicts from certain family members. 
    • Food is unpleasant to eat. No one wants to eat BBQ food from Wings that Fly, they prefer to eat pizza from Papa Elmo instead. 
    • Allergies. One of Susan’s relatives has a severe nut allergy. Susan forgot which person has the allergy and fears that someone will get seriously sick.
    • Fire. Although unlikely, we need to prepare for the possibility of fire.
  1. For each item, list its probability and impact. Do not list items that are highly improbable to occur. For example, the odds are extremely low that aliens will come down and take away grandma during the party. 
  2. Create a mitigation plan. Based on each item, create a mitigation or work around for each problem. For example, when you send out the RSVPs, ask each guest to select their meal preference. Keep the list short. For example, ask them if they want to eat BBQ chicken, pizza, or Chinese food. 
  3. Optional: Record the risk probability. This is where you assess the probability for the risk to happen. This is a number, from zero to one. For example, Susan’s uncles have a proven tract record of fighting in public.  You would give this risk a number “one.” 
  4. Optional: Record the risk impact. This is where you assess whether each risk has the capability of derailing your project.  This is a number, from zero to one. For example, heavy rains may not cancel the party, but grandma’s death sure will. Heavy rains will receive a score of zero but grandma’s death is a “one.” 
  5. Optional: Create a risk score. Calculate the risk score with the following formula: Risk Probability + Risk Impact - Risk Probability x Risk Impact. The Risk Score varies between 0 and 1, and the higher it is the more dangerous the risk is. For example, let’s assess the risk score for family fight between the uncles and create a score = 0.7+0.8 - 0.7*0.8 = 1.5 - 0.56 = 0.94. That is a high risk score. 
  6. Identify responsible parties. Someone should be assigned (in advance) to respond if a known risk occurs.
  7. Create an action timeline. Before the event occurs, list the timeframe on when to act. Preplanning the response time will help you effectively manage your resources (time and people). 
  8. Create a your Risk Register based on the information above. Below is a sample risk register. Click on the image to view it in full size.

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Risk Register for Grandma Bertha’s 100 Birthday Party

Sample Risk Register

A risk register is not something can be done in one sitting, do not rush and complete it in one day. Take time multiple times to review this document. In addition, a risk register must include feedback from your team. Ask them if the document is complete and does not have any unnecessarily risk. Business owners need to be able to plan for all risks in advance. Risk registers will help you weather the waves of business storms, today and tomorrow. 

One more thing: Do not create this document and file it away along with all the other planning documents, never to be seen again. Review this document  while the project has commenced and review it again as part of your Lessons Learned documentation. 

Reference

  1. http://projectmanagementquestions.com/2165/what-is-a-risk-rating-matrix

Got feedback for me? I’d love to read it! Please drop me a note in the comment section below.

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