# Step 2: Identify Key Risk Elements

Using a risk category checklist (a list of categories of potential risks covering all possible types of risk – e.g., financial, political, partner), the workshop group, with assistance from a number of subject matter experts, including branch managers, created a list of risks that could impact the achievement of the strategic objectives.

# Step 3: Score Risk Elements

The risks agreed on by the group were then placed across the top of a table with the strategic objectives listed vertically along the left side. Directly below each risk was a measure of likelihood of the risk occurring (again on a 1 to 5 scale). The likelihood score was agreed on by the subject matter experts. The team then scored each risk to each strategic objective, again on a 1 to 5 scale. This provided two outputs: the scoring of risks and the risk weighting of each strategic objective. A sample of this table is shown in Exhibit 15.5.

The risk scores were calculated as:

Σ (D × E × F)

where:

D = Strategic objective weighting (1 for low, 3 for medium, 5 for high)

E = Risk impact on objective (1 to 5)

F = Risk likelihood (from top of column) (1 to 5)

These were summed vertically for each risk.

The risk weighting of each strategic objective was calculated using the same formula but summed horizontally for each strategic objective.

The risks were then transposed onto a data table with their likelihood and their weighted impact score (the sum of each D x E calculation for each cell in the column). This provided the basis for the risk register and the heat map.

At this point, several graphs can be created to show the relative nature of the risks and the strategic objectives. From a risk-based perspective, a heat map can be created showing the risks with the highest likelihood and weighted impact score. The more strategic objectives a risk can affect, the greater is the weighted impact score for that risk. For strategic objectives, a graph can be produced to show the strategic objectives most impacted by risk. The more risks affecting a strategic objective, and with greater impacts, the greater that objective's weighted risk score.