Risk Management

Risk Management is the systematic identification and management of organisational hazards, threats and risk factors.

Risk management provides a framework for organisations to manage both internal and external factors that influence whether or not objectives are met.

The risk management process aids decision making by taking account of uncertainty and measuring the likelihood and consequences of the risk, and reviewing the measurement when controls are implemented. It is a process consisting of well-defined steps which, when taken in sequence support better decision making by contributing to a greater insight into risks and their impacts and is as much about identifying opportunities as it is about avoiding losses.

By adopting effective risk management techniques, organisations are able to ensure:

  1. compliance with Standards and Legislation,
  2. more effective strategic planning,
  3. better cost control,
  4. enhanced shareholder value by minimising losses and maximising opportunities,
  5. increased knowledge and understanding of exposure to risk,
  6. a systematic, well informed and thorough method of decision making,
  7. increased preparedness for outside review,
  8. minimised disruptions,
  9. better utilisation of resources,
  10. opportunity for open consultation with workers , and
  11. strengthening culture for continued improvement.

The risk management process is an often misunderstood but essential component to effective business management, highlighted by the fact that the current draft release of ISO 9001:2015 mentions the word “risk” 22 times (ISO 9001:2008 version mentions “risk” twice).

Organisations face many kinds of risks, some of which include organisation risks (eg financial, contractual and legislative) , safety risks (eg equipment and work methods) and product realisation risks (production, quality, and service risks).

Typically the risk management process involves the following:

  1. Define a risk management framework including organisational risk appetite (acceptable risk) and risk matrix.
  2. Identify and record hazards, threats or risk factors.
  3. Identify and record the risks (possible outcomes) associated with the items identified in step 2.
  4. Calculate the risk score WITHOUT controls in place (based on an approved risk matrix – likelihood vs consequence).
  5. Using the hierarchy of controls systematically identify controls (including responsibilities and records) that will be used to manage the items identified in step 2, and reduce the likelihood and/or consequence of the items listed in step 3.
  6. Calculate the residual risk score WITH controls in place.
  7. Ensure the residual risk score is within the acceptable limits as defined in step 1. If not implement additional controls.

Risk Management does not need to be rocket science and is easily and effectively implemented in organisations of all sizes from small businesses right through to large corporates.

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