Risks or uncertainties prevail in every business due to a lot of internal and external influential factors. While risks can thwart an organisation’s objectives, growth, and continuity, it is necessary to have a systematic approach to risk management. The ISO 31000 is the acclaimed international standard for risk management which outlines the specific guidelines and principles for organisations to manage their risks. It helps them to form a systematic and logical framework for risk management through which they can identify, analyse, prevent, and control or alleviate risks. So, what are the ISO risk management principles and guidelines that you should follow to successfully establish a risk management framework in your organisation?
The following section explains the 11 key principles and guidelines that are provided by the ISO standard to establish an effective and systematic risk management framework.
The risk management framework must create value in your business and protect it in the long run. To ensure that, your organisation needs to develop the framework by considering your specific business objectives, processes, goals, and potential risks. The framework should enable you to continually review your processes and contribute to their improvements.
The ISO standard points out in a clause that risk management should be an inseparable part of the organisation and its processes. Therefore, your senior management team should incorporate it in the core governance system of the organisation and make it a part of every process, from higher-level strategic processes to general operations.
This is one of the crucial principles to remember while formulating your framework. It means the decision-makers of your organisation must have risk-based thinking and consider the relevant risks while making any decision. It helps them to prioritise facts, initiate appropriate actions, and make the most informed decisions that best serve the business while ensuring minimisation of risks.
This is an inevitable principle that should support your risk management framework. You need to find effective ways to identify current risks as well as potential risks in your business. Hence, you can decide the appropriate actions and controls to prevent them or treat them and minimise your losses.
To make your risk management effective, it is necessary that you build a systematic, consistent and structured framework. Your organisation should determine the practices for the framework that can be uniformly applied in all processes, are understood by the employees, and ensure reliable outcomes.
To have the right framework for managing risks in your organisation, make sure to abide by this principle. You should consider the information available regarding any process and understand how to use it for initiating the risk management actions. Actions taken based on real-time information are best at addressing the risks in the processes. It also prevents them from occurring again because you have used all the information about a situation that resulted in risks and so you have mitigated them.
This is a basic principle that you need to follow to make your risk management framework competent at addressing your business-specific risks. You need to consider your organisation’s risk profile, as well as factors relevant to your operating environment to customise the framework as much as possible.
While developing your risk management framework you should consider different cultural as well as human factors. The management of risks is more effective when you recognise the role of your people and the established culture within your organisation in achieving the objectives. It helps the framework to prevent risks that can directly impact the people, culture, or their contribution to your organisational objectives.
It is necessary to maintain transparency in the organisation’s processes as well as management systems. Therefore, risk management framework should be made transparent and explicit so that all your stakeholders or interested parties are aware of it. To make your framework transparent, communication is the key. Also, you should communicate with the stakeholders whenever necessary to identify any new risks or analyse a risk better.
Organisations must build a dynamic framework for risk management that can respond to the evolving risks. This principle states that your risk management framework must be flexible enough to help your business operate in the challenging business environment. Its processes can be changed or improved so that you identify new risks and address them efficiently.
The last principle highlights that the cornerstone of a matured risk management framework is continual improvement. To make your framework strong and mature at addressing risks in the long run, you need to put your time and resources into its improvement. Through PDCA (Plan-Do-Check-Act) continuous cyclical methodology you can identify areas in the framework to improve, take actions and enhance its effectiveness from time to time.
While risks will continue to appear in your business, having an internationally acclaimed ISO management framework make your managers competent at managing the risks. The framework provides a set of well-planned practices and processes that help organisations to identify, control and prevent the risks arising in any area of their business, internally or externally. Following these predefined 11 ISO risk management principles and guidelines can help in developing the framework and making its implementation successful in your organisation. By ardently following each of these principles, you can assure the effectiveness of your risk management processes and prevent any uncertainties from impacting the continuity of your business.
If you want to get a strong risk management framework established in your organisation by adhering to the ISO principles and guidelines, we at Compliancehelp can assist you! We are a team of ISO management consultants and help you at every step to establish your framework. To get started, talk to our consultants!
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