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- Create Date February 9, 2023
- Last Updated May 5, 2023
This guide is designed to assist non-financial organisations in developing and using risk registers to support important business decisions. The premise of the guide is that risk registers should be used less frequently than is considered normal in the industry and the format of the risk register should be very different to what is believed to be best practice.
In order to appreciate the templates and ideas presented in this practical guide, we shall start by defining the risk, explaining the difference between risk (X) and a function of risk (f(X)) and highlighting the fundamental design flaws in how most modern day risk registers are constructed. This guides ends with a practical template used by successful corporations around the world that looks nothing like you've seen before when it comes to risk registers.
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Your argument is of course right. In some sectors, there may be practical difficulties. How dependent is your model on having good data, especially in assessing likelihood? I work in international development, where completeness of data and clarity of objectives can be a challenge, especially given the diplomatic, political and security context. In these circumstances is there the possibility of significant effort building an analysis on a foundation of sand? How would handle this?
We never have good data and yet quality of the data has never been an issue. The less data you have the wider is the uncertainty, the higher the risk. There is a whole value of information theory that allows us to calculate how much money we should spend to reduce uncertainty if we are unhappy about data quality. The whole premise of using ranges is that we have poor data.
Thank you