What is a risk register?
A risk register is a document (often in spreadsheet form) used by a company to log and track risks facing the company and how those risks are mitigated. Risks are often categorised by the area of the business to which they relate (for example, operational, commercial, finance, HR, IT and so on). As risks are identified, they are logged on the register, along with a member of staff responsible for monitoring that risk and identifying mitigating actions. Many companies also assign a score for the likelihood of the risk occurring and the impact on that business were that risk to occur. It is the combination of likelihood and potential impact that influences how the business prioritises the monitoring of the risk.
Why is a risk register important in a transaction context?
Potential buyers want to be certain they understand the risks facing the business they are buying. They also want to be sure that the post-deal management team will be aware of and focused on monitoring and mitigating these risks. Being able to share a risk register at an appropriate stage of the transaction is evidence that you have a proactive approach to risk management in your company.