Management tools are a dime a dozen. And yet, contrary to popular belief, most of them are good and helpful if used correctly and in an adequately defined context.
In “Tool Box Talks” we introduce you to common and less well-known tools and show you how you can exploit their potential for your enterprise, with today’s focus on the risk register.

What is a risk register and when should it be used?

The risk register is a risk management tool. Depending on the focus of the risk management activities, it documents risks related to a product, a project, a department or an entire enterprise. Though the tool stays the same for each of the perspectives mentioned, we strongly recommend having one independent risk register per perspective to avoid misinterpretation of the documented information (see “Do risk evaluations lead to faulty decisions?”).

A risk register should be used whenever risks need to be documented. The format of the risk register varies, depending on to the needs of the situation. An ad-hoc analysis, for example, generally requires less background information to be documented to be helpful than is needed for an extensive risk evaluation accompanying a complex and long running project. This difference in scope is reflected in the extent of the risk register. Besides the scope, the maturity of an organisation impacts the appearance of a risk register, which may be as simple as a spreadsheet or as complex as an integrated database using artificial intelligence for data completion and linking of information.

How is a risk register applied?

The simplest form of a risk register is a table listing all information required for risk management. The rows represent the individual risks while various pieces of information are organised in columns.
A basic set of risk information, i.e. columns in the risk register, are

  1. a continuous labelling for risk identification,
  2. an acurate description of the risk itself (i.e. what may happen and how does it affect the goals?)
  3. an estimation of the probability of occurrence,
  4. an evaluation of the impact and
  5. a proposal of a risk response.

There is much more information which may be included in a risk register, depending on the context.
Two approaches lend themselves as blueprints for adding information to a risk register in the context of a risk analysis. The most convenient one is working row by row, i.e. identifying one risk and then adding all related information before going on with the next risk. This approach follows intuition and thus is easy to facilitate. However, it also results in rather lengthy workshops and is therefore tiring. Alternatively, you may want to focus on the risk identification and description first and add all other information later. This approach shortens risk analysis workshops but also required a much more disciplined facilitation.

Beware of pitfall!

A risk register documents individual risks and their evaluation in a defined context. A common pitfall is to add up the individual risks and assume this number represents the overall product, project or organisational risk. Though this may be true in some rare instances, generally the actual product, project or organisational risk is significantly lower than the sum of the individual risks. The reason for this deviation between the overall risk and the sum of individual risks are dependencies between risks which are neglected if simply added up.

The transfer of risk information from one context to another is another topic to be aware of. Risk is defined as the “effect of uncertainty on objectives” (see ISO 31000:2018). Thus, if risks are transferred from one context to another, they need to be re-evaluated as generally the objectives shift with the context. Copy-paste of risk information from one risk register to risk register in a different context is simply wrong.

What is the use of a risk register?

A risk register summarises all information on risks within a defined context. Thus, it provides all data required for an effective risk management for the product, project or organisation. It also documents risk management-related activities by capturing changes in the evaluation of risks or decisions how to respond to risks. Therefore, the risk register allows for a detailed overview of risks and how they are managed.

Follow us on Xing and LinkedIn to learn on a regular basis how you can make the most of management tools, so that you will stay one step ahead of your competitors.

Management tools are a dime a dozen. And yet, contrary to popular belief, most of them are good and helpful if used correctly and in an adequately defined context.
In “Tool Box Talks” we introduce you to common and less well-known tools and show you how you can exploit their potential for your enterprise, with today’s focus on the SWOT analysis.

What is a SWOT analysis and when should it be used?

A SWOT analysis examines an organisation’s present state of affairs, taking a look at two dimensions:

  1. An organisation’s potential (looking on the inside) will reveal strengths and weaknesses;
  2. an organisation’s environment (looking on the outside) will unmask opportunities and threats.

This investigation of internal and external factors helps to assess the current state of affairs in a very precise and exact way.
Where SWOT analyses are performed is in strategic planning processes as these often require an exact status assessment as a first input, which can be conveniently generated by a SWOT analysis.

How is a SWOT analysis carried out?

The first step in any SWOT analysis is to define its context, i.e. that the subject in question has to be described, for example a company, an organisation (or a part of it) or a concrete product or service. Plus, you need to decide what the focus of the analysis is to be. Depending on the nature of the strategic planning processes relevant to the SWOT analysis, this can be, for example, a company’s branding as employer, its positioning in a specific market segment or the product portfolio.
Having set the analytic frame, the actual analysis can begin and strengths and weaknesses, opportunities and threats for the issue in question are defined. If the analysis is about a product (subject of analysis) that is to be introduced into a new market (perspective), the following four questions can be helpful:

  • What strengths does the product have relevant to the market?
  • What weaknesses does the product have significant for the market?
  • What opportunities does the new market offer which the product is to open up?
  • What threats are there with regard to the new market which can impede a product’s introduction?

In any SWOT analysis, people with different backgrounds should be involved, for example staff from different departments or with varying functions or external experts. If available, you should also use data relevant to the analysis. If a product is to be introduced, this can be market analyses or comparisons with products sold by competitors.

Beware of pitfall!

The greatest danger when making use of a SWOT analysis is the failure to pinpoint its context. If its definition is not appropriate or precise enough, the results, too, will be at best vague, sometimes even contradictory.
If, for instance, the context of a SWOT analysis is only roughly outlined as “the new product”, using a modular construction system can be interpreted both as strength (“can easily be aligned with customers’ demands”) and as weakness (“is difficult to handle in terms of production and logistics”).

What is the use of a SWOT analysis?

A SWOT analysis helps to create a comprehensive and exact representation of how things really are. It is not limited to the organisation or the product itself, but also takes into account a company’s external business environment.
This information is the input to further strategic planning processes, which often centre around questions like:

  • How can we use strengths to seize opportunities?
  • What weaknesses prevent us from doing so?
  • What threats are likely to come up due to our present weaknesses?
  • Which of these four areas needs to be addressed?

This list is in no way exhaustive and should be adjusted to present needs.

Follow us on Xing and LinkedIn to learn on a regular basis how you can make the most of management tools, so that you will stay one step ahead of your competitors.