To prevent financial losses in your company, set up and maintain a risk register using these seven easy steps
If you don't determine your company's financial risk areas you could run into serious financial issues. But it's not enough to just assess your risk areas. You have to record them too.
This will enable you to check and reassess your company's risk profile later on.
So how do you record your risks?
You can create a risk register to do this in as little as seven steps...
You can create a financial risk register in just seven steps
Step # 1: Identify your risks and put them in your risk register as indicated below.
Step # 2: Analyse the risks you identified and determine what risks have a material monetary impact and affect the business as a whole.
Step # 3: Describe and define the risks and indicate in the 'risk impact' and 'current status' columns below what is currently being done or status of the risk area.
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Step # 4: Determine a score that most applies to your business to determine the likelihood or 'change' that this risk will have on the business. We have decided to use a score between 0-30, 0 being highly unlikely and 30 being likely and material impact.
• Low between 0-10
• Medium between 11-20
• High between 21-30
Step # 5: Determine what control you can implement to prevent or reduce the risk in the business as indicated in 'controls implemented below'. Example of these controls include:
• Key man insurance;
• Employee benefits;
• Training for staff;
• Contingency plans for IT and disaster recovery; and
• Off-site storage and cloud backups.
Red flag: If you don't implement controls after you identified risk areas, your risk register will fail.
Step # 6: Assign a manager to take responsibility for managing and controlling each risk. Instruct this manager to give feedback to management or directors on the status of the risk area. Ask him to report if the controls are still working and in place.
Follow these seven steps to record your company's financial risks and avoid financial disasters.