In a complex and demanding business environment, risk management takes more of a strategic requirement than just a need. Any public or private firm is exposed to several forms of risk that may have an impact on its operations, reputation, and bottom line. ISO 31000 provides an accepted framework that assists organizations in understanding the effective methods for risk management from the outset. Initially introduced in 2009 by the International Organization for Standardization, ISO 31000 is tailored to suit organizations of any size, type or industry. If the company complies with ISO 31000, this will increase the company’s competitive strength and give the push that long-term survival cannot be ensured by any company through the sail of uncertainties to opportunities.
ISO 31000 in Risk Management & Its Importance
It is a standard constructed to identify, assess, and control threats associated with an organization’s capital and earnings. These risks may differ in type. For example, from financial uncertainty to legal liabilities, technology, management errors, damage, accidents, natural disasters, etc. ISO 31000 provides the principles, framework, and process of risk management which are useful for any organization, large or small, private or public, and in any activity area.
ISO 31000 has provided much guidance to the organization for the efficient handling of risk by more or less three key areas that are: ‘better identification and management of risks’, ‘increase confidence’ among stakeholders, and ‘efficiency and effectiveness’ in the achievement of objectives. It further encourages a state of risk culture, builds better resilience among organizations and orients an entity to get better adaptable to the change process in a more effective approach.
Key Principles Underlying ISO 31000 in Risk Management
ISO 31000 is built on a set of principles that need to be integrated with the framework of risk management in every organization. Such principles help enforce effective, efficient, and aligned-to-objectives-of-the-institution risk management.
Integration
The first principle of ISO 31000 is integrating risk management into all activities of an institution. In light of this, it is worth pointing out that the risk management function should not be considered as a separate or isolated activity taking place somewhere at a corner of an organization; it can be well integrated into the governance, management, and business activities of an organization. That is, risk management has to be built into the strategic planning processes, general management aspects as well as performance measurement methods of a certain company. Only when the organizational culture instills risk management, businesses can manage risk in an aggressive rather than passive way.
Integration can be regarded as embedding risk management in the values and practices of an institution in a manner that decisions at all levels consider risk. This is a more naturally interwoven approach to risk management that safeguards the interests of the organization in its assets and reputation in a way that realizes its objectives.
Personalization
Each organization is unique in its existence, the amount of risk it can bear and how the company does its business. Concerning this, ISO 31000 suggests that a Risk Management System must be integrated with each requirement that is pertinent to the organization. It must be according to the context in which the organization operates both internally and externally, which includes culture, structure, strategy, and the external environment.
Comprehensive and well-structured framework
No organization can succeed without a well-structured and thorough framework for risk management. An effective structure of risk management must encompass the main facets, which include: identification, assessment, treatment, monitoring, and review. A structured policy guides the performance of risk management in a systematic, consistent, and complete manner so that it can help the entity achieve reliable and repeatable results. Inclusiveness makes it certain that:
The first critical principle of ISO 31000 is that risk management should be integrated, and consideration should be made to involve all relevant stakeholders in the process of risk management. Stakeholders have a very clear perception and insight into the risks to which the organization is exposed. These include, among others, employees, customers, suppliers, regulators, and shareholders. As such, the organization can develop informed, relevant, and up-to-date activities in terms of risk management by engaging them in the processes.
Dynamic process
Risk management is not a one-off or isolated activity. It is an ongoing, living process. Organizations exist in a changing environment, and with these changes arise new risks. Additionally, existing risks could shift or fade away. ISO 31000 states that the processes for risk management have to be constantly monitored and reviewed concerning their continuing relevance and effectiveness.
Effectiveness and full communication
Effective communication underpins every effective risk management process. ISO 31000 underlines that all relevant information should be communicated comprehensively and clearly and this should be done promptly and openly by stakeholders.
Continual improvement
The process of risk management is continuous. It is cyclical in terms of constant monitoring, review, and improvement. ISO 31000 promotes the continuous improvement of the process of managing risk according to a model of planning, implementation, review, and adjustment. This assures that while the environment of risk may change around the organization, the process of managing that risk will still be applicable and appropriate.
Conclusion
ISO 31000 is developed as a rigorous yet very flexible framework for the implementation of the risk management process, which enables an organization to wade gracefully through the complexities lying within the company. By adopting ISO 31000 Risk Management, the organization can align the risk management processes with the organization’s key activities, customize the risk management framework to fit the organization’s needs and keep enhancing the organization’s capability in managing risk. INTERCERT is a globally recognized certification body. They enhance your risk management strategies by performing audits throughout every phase of your organization’s life cycle. For certain, implementing ISO 31000 within public and private organizations shall increase their resiliency, protect assets, and achieve objectives with increased confidence.
