Using a risk register to capture, organize, manage and utilize risk information is commonly perceived as a component of strong governance.
A risk register is far more than simply a way of achieving compliance with governance standards. Effective risk registers can also be a strategic and operational tool capable of adding significant value to your organization.
We set out five clear reasons explaining how your organization will benefit from a risk register:
01
The organization-wide view of risk pursued by Enterprise Risk Management (ERM) involves dealing with a huge variety of diverse data, including multiple risk events, their causes, classifications, impacts, severity scores and the required responses to effectively manage these risks.
In an unstructured format, this data is susceptible to chaos. Consider receiving 50 emails, each containing slightly different information - some meticulously researched, others subjective or opinion-based, some clear and concise, while others brief and inconclusive. Trying to organize and leverage such data would be immensely challenging. Similarly, managing organization-wide risk without a consistent structure can feel just as overwhelming.
A risk register provides a structured framework for capturing data in a clear and consistent manner. Organizations have the flexibility to define the specific information they want to capture, how it's organized and presented, and who can access it. This structured approach brings simplicity. Instead of facing with the daunting question, "What are our risks?" stakeholders can use the risk register to logically and sequentially capture data. This streamlined process allows for seamless transition from data capture to analysis within a single document.
02
Organizations face limitations on their resources, both in terms of budgetary constraints and the capacity of employees to execute tasks. Effective risk management should prioritize issues that present the greatest threat to an organization’s strategic objectives. However, without a risk register, this can be quite challenging. The multitude and diversity of risks can be a barrier to effective prioritization and human factors must not be overlooked. Individuals may be inclined to downplay risks due to apprehension about drawing attention to them, while multiple risk owners competing for resources may be tempted to overstate a risk.
A well-designed risk register, supported by a clear and consistent risk framework, can drive attention to the issues that demand priority within an organization. A risk register can provide easy access to defined and objective criteria for scoring risks, enabling stakeholders to document and justify their assessments of the risk, while also facilitating filtering and sorting to enhance visibility of priority issues.
03
Management structures serve a purpose and should be leveraged as integral components of an effective ERM approach. It is unrealistic to expect any single individual or committee to have the capacity to oversee every risk confronting a modern organization.
Whilst those responsible for governance maintain ultimate accountability for risk management systems, the day-to-day management of risk should be delivered throughout an organization.
Risk registers play a crucial role in achieving this goal and streamlining the escalation and delegation process. By incorporating escalation and delegation pathways based on the severity of a risk, risk registers ensure that ownership of the risk is appropriately assigned up the governance or management chain. Automation within a risk register enables consistency and reduces the likelihood of manual errors or process non-compliance.
04
Put yourself in the shoes of a technical specialist who has identified a risk within your area of expertise. While it's a concern, it's not immediately critical and you have a plan to address it. However, before you can implement your solution, control is taken away by the committee that lacks understanding of your work. Instead, you're assigned a set of actions that are far more complex than necessary. How would you feel? Likely frustrated and disengaged.
A well-designed risk register can eliminate the need for micromanagement, which can disengage employees who were initially supportive of the risk management approach. Employees like the technical specialist mentioned can be assigned as the risk owner and tasked with updating risk records within the register at specified intervals, while adhering to the described escalation pathways in case the situation deteriorates. Senior management gains visibility into the information contained within the risk register, allowing them to confirm that everything is under control without needing to intervene unless they have concerns.
05
Last, but certainly not least, is the consideration of when risk becomes necessary and valuable. A risk register serves as a powerful tool for communicating to employees: “These are the risks we acknowledge exist, and as long as they remain stable, we accept them”. It may even enable an organization to assert: “We have the capacity to assume additional risk in this area– what are our available options?”.
This can be achieved by integrating concepts like risk appetite, risk tolerance or target risk scoring into a risk register. Automation can streamline this process, providing immediate feedback to employees scoring the risk on whether further action is necessary and how well the risk aligns with the established tolerance levels.
There is no one-size-fits-all risk register. Every organization must consider the data they aim to capture, the logistics of maintaining an updated register, utilising its outputs effectively, and determining the format for presenting risk information. Clear, concise and consistent data enables robust reporting.
A risk register can significantly enhance your organization’s ability to meet expected governance standards but, when appropriately designed, it can also achieve this in an engaging and empowering way.
Ready to optimize your risk management strategy? Contact us for more information on how WTW’s risk register tool can help you and your organization.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
