As a non-executive director (NED), it is important to have a good understanding of the risk register, as it is a key tool for managing and mitigating the risks that an organization faces.
What is a risk register?
A risk register is a document that identifies and assesses the risks that an organization faces. It typically includes information on the following for each risk:
- Risk description: What is the risk?
- Likelihood: How likely is it that the risk will occur?
- Impact: What would be the impact on the organization if the risk occurred?
- Mitigation actions: What steps can be taken to reduce the likelihood or impact of the risk?
- Owner: Who is responsible for managing the risk?
- Status: What is the current status of the risk?
Why is the risk register important?
The risk register is important because it helps organizations to:
- Identify and prioritize risks
- Develop and implement mitigation strategies
- Monitor and manage risks over time
- Report on risks to stakeholders
What NEDs need to know about the risk register
NEDs have a responsibility to ensure that the organization has an effective risk management system in place. This includes reviewing the risk register on a regular basis to ensure that it is accurate and up-to-date.
NEDs should also pay attention to the following when reviewing the risk register:
- The overall level of risk faced by the organization
- The most significant risks to the organization
- The effectiveness of the organization's mitigation strategies
- Any changes in the risk profile since the last review
NEDs should also be prepared to ask questions about the risk register, such as:
- How are risks identified and assessed?
- How are mitigation strategies developed and implemented?
- How are risks monitored and managed over time?
- How are risks reported to stakeholders?
By understanding and reviewing the risk register, NEDs can play a vital role in helping organizations to manage and mitigate their risks.
Here are some additional tips for NEDs regarding the risk register:
- Make sure that the risk register is aligned with the organization's strategic objectives.
- Ensure that the risk register is regularly reviewed and updated.
- Be aware of the key risks facing the organization and the mitigation strategies in place.
- Ask questions about the risk register and challenge assumptions.
- Use the risk register to inform decision-making.