Risk Management
We analyze and manage risks every day. From properly preparing food, crossing the street, and wearing a seat belt, to arranging a trip on public transportation. Each of these is an example of a risk management process. Sometimes it is the result of “common sense”, sometimes these decisions are made unconsciously. When it comes to business management, a more precise and formal approach is required.
The world is changing rapidly, and uncertainty has become a daily reality. Just think about the Corona crisis, economic conflicts, and environmental requirements. How organizations deal with these uncertain factors determines their success. In other words, the better you manage risks, the better your performance will be.
One strategy for managing risk is to use standards, such as ISO 31000. This approach is useful in almost any situation, for organizations of all shapes and sizes, to manage risk in day-to-day operations.
Fortunately, we can rely on ISO 31000, the international standard for risk management. This standard allows you to increase your results and reputation in the long run. Why? Because ISO 31000 is not only a basis for risk analysis but also helps you identify opportunities.
Uncertain elements and risks can have a positive impact on achieving your goals. If you know how to become a risk-aware organization, you will gain a competitive advantage!
ISO 31000 provides guidelines for companies and other organizations to integrate risk-informed decision-making into their governance, planning, reporting, policies, values , and culture. This standard describes a set of guidelines to simplify risk management for organizations. It is an open, principles-based system that makes the standard suitable for any context. The international standard is intended both for risk management at the company level and for managing strategic and operational risks in daily operations or projects.
· Proven effectiveness: Since ISO 31000 is a recognized international standard, countless organizations use it. This means that ISO 31000 has been thoroughly investigated and proven to be effective.
· Focus on goals: It is more likely to achieve goals if we follow international best practices in risk assessment. Improve success rates across all business operations by focusing on process, thinking proactively, rather than reactively, and giving employees ownership of their work responsibilities.
· Lower costs: Through risk analysis, you increase your chances of making quick decisions and reducing unnecessary costs. Reduce the frequency and ultimately eliminate risks by educating employees and stakeholders about identified risks.
· Increasing the profitability of the organization: When an organization reduces unnecessary risks, it also reduces the possibility of financial damage caused by events related to that risk.
· A culture of risk awareness: The standard ensures that informed decisions are made at all levels (e.g., when allocating resources). Increasing employees’ awareness of organizational risks by including them in the management and responsibility framework of the processes they usually use.
· Reputation: An organization that implements ISO 31000 guidelines demonstrates to the outside world that it not only identifies risks but also analyzes and controls them, giving you a competitive advantage because ISO is an internationally recognized symbol. For quality standards.
· Identify opportunities: The revised ISO 31000 emphasizes that risks are not necessarily negative but
Can have a positive impact on your objectives.
· Scalable: As your organization grows, new risks emerge. However, the ISO 31000 guidelines apply to any type of organization, regardless of size.
· Compatibility with other standards: Thanks to the structure of the latest version of ISO 31000, this standard is more compatible with popular management standards, such as ISO 9001 (quality management) and ISO/IEC 27001 (information security).
· Reduce Legal Exposure by Identifying Key Drivers: Organizations may be able to reduce their legal exposure and mitigate litigation risks.
Raising investment: Helping the organization to increase its funding. Banks and investors tend to be risk-averse. If an investor is convinced that an organization is serious about identifying and mitigating risks, they are likely to invest.
· Investigating risks in a standardized way: When implemented correctly, ISO 31000 can serve as a template that helps organizations identify key drivers of risk.
Although there are clear benefits to adopting ISO 31000, there are some challenges that must also be considered, including the following:
Adherence requires continuous effort. If an organization fails to incorporate ISO 31000 concepts into its processes, the risk mitigation plan created will quickly become obsolete and likely to be ignored by employees.
The potential for a false sense of security: Even with an effective risk mitigation program in place, organizations must remember that there will always be unknown risks.
Organizations can become risk-averse. Risk aversion can make it difficult for an organization to invest in new opportunities.
ISO 31000 defines risk as “the effect of uncertainty on your objectives”, so risk management is essentially a tool for managing threats (negative effects) and taking advantage of opportunities (positive effects). It should improve the performance of your organization, project, product, or service. In short, the main objective of ISO 31000 is to create and protect value
Everyone involved in risk management in their organization can benefit from ISO 31000, so not only professional risk managers, but senior managers; risk analysts; production line managers; project managers, and external and internal auditors can benefit from the standard guidelines.
ISO 31000 is not a management standard in the strict sense, as it contains guidelines (not requirements) for a management system. Conclusion: Unlike ISO 9001 or ISO 14001, you cannot obtain ISO 31000 certification for your organization. However, professionals can get a personal certificate.
8 principles of ISO 31000 that support the main objective:
integrated: As a result, risk management should be integrated into all operations and activities.
Structured and comprehensive: The approach should be structured and comprehensive.
Customized: The risk management framework should be adapted to the context and objectives of the organization.
inclusive: The entire stakeholder community should be involved in risk management.
Dynamic: Taking proactive measures, and anticipating and reacting quickly to changes are critical elements of effective risk management.
Best available information: Risk management means considering all the limitations of available information.
Human and cultural factors: These factors are essential and should be addressed at every stage.
Continuous improvement: Through accumulated experience and knowledge, an organization should be able to become stronger over time.