ISO 31000: The “Gold-Standard” in Managing Risk

In a challenging and uncertain environment, the way organization form enhancing decision-making, performance, responsibility, and resilience also affected. Organizations also have challenges and difficulties that must be responded and resolved quickly. With the arising threats of today’s digital era, organizations need a thorough and integrated approach to risk management. With the implementation of ISO 31000, organization can analyze and mitigate risks effectively using provided guidelines and blueprints.

Risk is a component of decision-making in documented procedures and process upon unexpected threats. In order to increase the likelihood of success in the complex, diverse, and demanding activity of managing projects and developing products, risk management must be implemented. Risk management was introduced as a field in many business and engineering institutions during this time as academic research on the topic gained relevance.

With the emerging risks and threats that could harm business activity, Multimatics prepares organizations with globally-recognized framework and best practices which will enhance organization’s performance in mitigating and managing risks better. Multimatics offers Risk Management training and project programs and to support organizations in building robust risk management process and procedures for their future business success.

Risk management has become a crucial component of management and control choices, with extensive use in industries including manufacturing, insurance, and economics, among others. The term “risk” refers to unpredictable events, potential risks, damages, or other unwanted effects that can be described using a probability, whereas the term “management” refers to planned measures or efforts to control these occurrences. Therefore, risk management can be viewed as a structured method to mitigate the effects of risks, or as a proactive method of decision-making that seeks reduce the effect of unwanted future events by identifying potential risks, analyzing them, and planning the responses required for their monitoring and control.

Risk management has emerged as an important factor in management and control decisions. While the word risk applies to uncertain events, possible hazards or damages, or other undesirable consequences, which can be expressed by means of a probability, management indicates the organized actions or activities to control these incidents. Frankly, risk management can be understood as a structured process to minimize or mitigate the effects of risks, or a proactive process of decision making that aims to minimize the consequences of negative future events, by identifying potential risks, analyzing them and planning the responses necessary for their monitoring and control.

Therefore, organization have ISO 31000 standard which become the milestone for organizations to control and manage their risks. The international standard for risk management, ISO 31000, offers businesses a structure, concepts, and rules for identifying, evaluating, managing, and communicating risks. Furthermore, ISO 31000 is a broad guide that must be customized based on the environment and goals of the organizations.

There are 5 steps of implementing Risk Management, which are:

1. Establishing the Management Context

Define goals and objectives, as well as roles who are responsible for each objectives.

2. Risk Identification

When identifying risks, it is important to ensure whether the risk have impacts on other parts of the business. Take notes of all the circumstances that could harm your company to get this process started. Recognize that you won’t consider all potential hazards, and plan to add concerns to your list over the course of a few days or even weeks. In addition, ensure to request the identification of hazards from departmental leaders as well. Your strategy should be as all-encompassing and thorough as possible.

3. Risk Analysis

It’s time to determine the likelihood of the event occurring and the severity of the damage now that you have a list of possible or present threats and dangers. Determine the relative importance of each risk using this risk analysis to avoid over- or under-allocating resources for mitigation in the following stage.

4. Risk Evaluation

When organization gain insights and knowledge from risk analysis report, it is important to review and evaluate the report results and focus on risk mitigation. It is also essential to evaluate the overall risk management implementation, including improvements and corrective actions that can be made to combat risk events.

5. Risk Treatment

In this stage, organization shave decided which corrective action taken when implementing risk management process and procedures so that not only organizations can predict potential risks, but also have effective corrective plans to mitigate them. Determine future actions and objectives to prevent potential risk events ahead.

There are 5 essential components of ISO 31000 to ensure risk management success’ in organization, which are:

1. Principles

The principles of risk management are the foundation of ISO 31000. They provide a framework for organizations to develop and implement effective risk management processes, which is formulated in 11 principles of risk management.

2. Framework

It provides a high-level overview of the risk management process. It includes the following elements such as context, risk treatment, communication and consultation, and the ongoing review and improvement of the risk management process.

3. Process

It is a more detailed description of the risk management activities that organizations need to undertake. It includes the following steps such as establish the context of risk management, evaluate the risks, treat the risks, communicate and consult on risk, and monitor and review the risk management process.

4. Implementation

It puts the principles, framework and process into practice. It includes the following activities, which are assigning responsibilities, developing and implementing risk management policies and procedures, and conducting training for staff on risk management.

5. Assessment and improvement

It ensures that the risk management process is effective and meets the organization’s needs. It includes the following activities, including measuring the effectiveness of the risk management process, identifying opportunities for improvement, and implementing improvements to the risk management process.

If you’re interested in learning more about risk management, read also the 4 Types of Risk Management, Risk Appetite in Enterprise Risk Management