An Overview of ISO 31000
ISO 31000 is an international standard that provides businesses with principles & guidelines for risk management from the ISO. Whether you work in a private, public, or community enterprise, you can benefit from the ISO 31000 Certification because it applies to most business activities comprising management operations, communication processes & planning. By implementing the guidelines and principles of ISO 31000 in your Organisation, you will be able to improve operational efficiency, stakeholder confidence & governance while minimising losses. This standard helps you to boost health & safety performance, set up a robust foundation for decision making & encourage proactive management in all areas.
This standard doesn't provide detained requirements or instructions on how can you manage specific risks, nor any advice regarding specific application domain; it remains at an ordinary level. Relative to earlier standards on risk management, the 31000 standard innovates in some areas:
- It introduces the notion of risk appetite or the risk level in which Organisation accepts to take on in return for expected value;
- It provides a new meaning of risk as the effect of uncertainty on the possibility of achieving the objectives of an organisation, emphasising the importance of defining objectives before attempting to control risks and emphasising the role of uncertainty;
- It defines the framework of risk management with different organisational procedures, roles & responsibilities in the management of risks;
- It outlines a management philosophy where risk management is seen as an important part of strategic decision-making.
ISO 31000 Framework
The framework is made up of 6 distinct areas:
- Design: Organisations will need to design a risk management strategy that works for the Organisation based on its requirements.
- Leadership: Leaders within the company or Organisation will need to take the initiative to ensure that ISO 31000 is adopted & applied in a way that aligns with the Organisation's culture & business objectives.
- Improvement: Organisations should continuously look for ways to improve their 31000 implementations.
- Evaluation: This assesses the design to know what is working and what may need to be refined.
- Implementation: This implementation process integrates the Organisation's risk management design into business processes. Implementation is generally a formal process with stated deadlines, objectives & reporting requirements.
- Integration: While it is vital to integrate risk mitigation into as many organisational processes. It is vital to not cause operational bottlenecks or stand in the way of core business processes being performed.
Key Clauses of ISO 31000
- Clause 3: Risk Management Principles: In order to have effective risk management, an organisation must comply with the following principles:
- Risk management is an essential part of all organisational processes;
- Risk management takes human & cultural factors into account;
- Risk management facilities continual improvement of the Organisation;
- Risk management protects & creates value;
- It is tailored;
- It is inclusive & transparent;
- It’s an essential part of all organisational processes;
- It clearly addresses uncertainty;
- It provides continual improvement of the Organisation;
- It is iterative, vibrant and responsive to change.
- Clause 4: Risk Management Framework: ISO 31000 states that the success of risk management will depend on the management framework's management providing the foundations & arrangements that will embed it throughout the Organisation at all levels. The framework:
- Helps in managing risks efficiently via the application of the risk management process;
- Ensures that information regarding risk derived from the risk management process is effectively reported;
- Confirms that this information is used as a basis for decision making & accountability at all relevant organisational levels.
- Clause 5: Risk Management Process: The process should be:
- Embedded in the culture & practices;
- An integral part of management;
- Tailored to the Organisation's business processes.
- Risk management process includes the following activities:
- Consultation & Communication: Communication & consultation with internal & external stakeholders should take place during all stages of the process.
- Establishing the Context: By establishing the same, the Organisation clears its objectives, defines the internal limits to be taken into account when managing risk & sets the scope & risk criteria for the remaining process.
Benefits of ISO 31000 Standard
Following are some benefits of ISO 31000 Standard:
- Increase the Profitability of the Organisation: When an organisation mitigates needless risks, it also lessens the potential for financial impair stemming from events tied to that risk.
- Drive an organisation to be more pre-emptive: A good implementation of ISO 31000 can aid an organisation shift from being reactive to taking a more proactive approach to risk mitigation.
- Address risks in a standardised method: When properly implemented, the standard can act as a template that will aid organisations in identifying key drivers of risk. It establishes risk criteria & risk treatments in a standardised way.
- Effectiveness: ISO 31000 is used by countless organisations because it’s an internally recognised standard. This means that the standard has been thoroughly vetted & proved to be effective.
- Create a risk mitigation culture: By incorporating risk mitigation into almost all business processes, employees will become used to the idea of identifying & potentially mitigating risks.
How to Implement ISO 31000?
Each Organisation needs to take a distinct approach to implementing ISO 31000 because every Organisation is different. Even so, ISO outlines 3 key steps for getting started:
- Business Objectives: The risk management strategy of an organisation should align with its business objectives, not get in the way of them.
- Assess Existing Governance: Larger organisations likely already have a governance structure in place. That existing structure useful in the formulation of roles & procedures regarding ISO 31000.
- Consider Commitment Level: Prior to implementing the standard, organisations should consider the resources they want to invest in their risk mitigation efforts.
While following the implementation steps can be done in order, they should also be repeated consistently.
- Consultation & Communication: This step aims to increase awareness & understanding among stakeholders while also collecting information & input to aid decision-making. It should take place overall all steps of the implementation process.
- Context, Criteria, and Scope: The primary goal of these steps is to customise ISO 31000 to the company or Organisation's risk management needs. Organisations should be aware of the breadth of implementing risk management. They should also understand the external & internal environment of the company. Lastly, the Organisation should establish criteria based on company priorities, policies, and objectives. The criteria should be re-evaluated throughout the implementation process & amended if necessary.
- Risk Assessment: This step includes three separate processes:
- Risk Identification: This process is to find the risks that could harm or obstruct a company’s business objectives.
- Risk Analysis: The goal is to evaluate & comprehend any risks & their features, comprising the risk level, sources, complexity, probability, circumstances & effective controls.
- Risk Evaluation: This is to compare the risk analysis to the risk criteria to determine where the action is required & support those decisions.
- Risk Treatment: The main purpose of this step is to choose & apply risk management options.
- Review & Monitoring: This step should take place during all stages of the implementation. The primary goal is to assess the effectiveness of the process implementation & find any room for improvement.
- Reporting & Recording: This step aims to document the implementation process & communicate activities & outcomes to the Organisation.
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Frequently Asked Questions
It’s an international standard published in 2009 that provides guidelines & principles for effective risk management.
It completely identifies risk management principles, defines the risk management framework & finally risk management process.
The first is identifying the hazards, the second is assessing the risks and the last stage is putting control measures.
Mandate, plan, implement, checks & improvements.
It's the amount of risk an organisation is willing to take in pursuing objectives it deems have value.