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The risk management process is a framework for the actions that need to be taken by an organization. The figure below shows guidelines on managing risk by The International Risk Management Standard, ISO 31000:2018. The lifecycle involves the systematic application of policies, procedures and practices to the activities of communicating and consulting, establishing the context and assessing, treating, monitoring, reviewing, recording and reporting risk.
[Source image: ISO 31000:2018 Risk Management Process]
Communication and Consultation
Communication aims to raise risk awareness and comprehension, whereas consultation entails gathering input and information to aid in making informed decision-making.
Scope, context, criteria
Understanding the department's goals and describing the external and internal context in which it functions are essential.
Risk Identification
Identify, recognize, and define the uncertain occurrences or hazards that may aid or hinder the department's achievement of its goals.
Risk Analysis
Determine the level of risk exposure by understanding the nature of the risk. Uncertainties, risk sources, repercussions, likelihood, occurrences, scenarios, controls, and their effectiveness are all factors to consider.
Risk Evaluation
Compare the result of the risk analysis with the risk criteria to determine if additional action is required.
Risk Treatment
Accept, monitor, share, avoid, lessen the threat's likelihood/impact, or optimize opportunities are some of the alternatives for dealing with the unknown event.
Monitoring and Review
Monitor and discover deviations from the needed or expected performance level. Examine the risk management method, risk, controls, and treatments for their acceptability, sufficiency, and effectiveness in achieving specified goals.
Recording and Reporting
The quality of communication with stakeholders, support of top management, and oversight bodies in performing their responsibilities can be improved by documenting and reporting on the risk management process and its outcomes on a regular basis through suitable governance mechanisms.
In a nutshell, risk management aids businesses in developing strategies, achieving goals, and making well-informed decisions. It's a part of governance and leadership, and it's crucial to how an organization is managed at all levels.
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