In today’s energetic business environment, the ability to manage risks effectively is crucial for organizational success. Since risk management is not just about avoiding dangers; it also covers identifying opportunities and making informed decisions that enhance an organization’s resilience and performance, hence provides a comprehensive framework for managing risks thoroughly and transparently.
One of the most popular standards for managing risks is the ISO 31000:2018. In this blog, we will explore the principles of risk management as outlined in the ISO 31000, and explore their relevance in the context of achieving ISO certifications like ISO 9001, ISO 14001, and ISO 45001.
Understanding Risk Management
Managing risks is an organized process of identifying, assessing, controlling and monitoring risks that could potentially affect the achievement of an organization’s objectives. It involves understanding what could go wrong, evaluating the probability of an event tied to an identified risk occurring, determining the severity of the problems caused by the event occurring, and implementing measures to mitigate those events. The goal is to create value, protect assets, and ensure long-term sustainability of an organization.
ISO 31000:2018 provides guidelines and principles that help organizations implement a healthy risk management system. These principles are designed to be applicable to any organization, regardless of size, industry, or sector.
The Principles of Risk Management
1. Integrated
Risk management should be an integral part of all organizational processes. It is not a stand-alone activity that happens in isolation, in fact it should be intertwined into the fabric of an organization’s culture and everyday operations. By integrating risk management with strategic planning, project management, and other core business processes, organizations can ensure that risks are managed proactively and steadily.
2. Structured and Comprehensive
A structured and comprehensive approach to managing risks ensures consistency and reliability in managing risks. This involves having a clear framework, defined processes, and consistent methodologies. ISO 31000 emphasizes the importance of using a structured approach to ensure that all risks are identified, assessed, controlled and monitored in a coherent manner.
3. Customized
Managing risks should be tailored to the external and internal context of the organization. Every organization is unique, and so are its risks. Customizing the risk management process to fit the organization’s specific context, objectives, and stakeholders’ needs is essential for its effectiveness.
4. Inclusive
Involving the stakeholders in the risk management process is crucial since they provide valuable insights and information that can help identify and evaluate risks more accurately. An inclusive approach ensures that the perspectives and expertise of all relevant parties are considered, leading to more effective risk management decisions.
5. Dynamic
The risk landscape is constantly evolving, and so should the risk management. ISO 31000 highlights the importance of a dynamic approach that can adapt to changes in internal and external environment. This involves continuous monitoring and reviewing of risks and the effectiveness of risk management strategies.
6. Best Available Information
Effective management of risks relies on the best available information. This includes historical data, expert opinions, and the results of risk assessments. It is important to recognize that information can be uncertain or incomplete, and decisions should be made based on the best available data while acknowledging these limitations.
7. Human and Cultural Factors
Human behaviour and culture significantly influence risk management. Understanding and considering these factors can help in developing effective management strategies for risks. Creating a risk-aware culture where employees are encouraged to identify and communicate risks is crucial for the success of the risk management process.
8. Continual Improvement
Risk management should be continually improved through learning and experience, and an ongoing commitment to refining and enhancing risk processes, strategies, and outcomes. This principle ensures that risk management evolves with changing circumstances, remains effective, and adapts to new challenges. Organizations should regularly review and update their management of risks processes.
Risk Management Relevance to ISO Certifications
Implementing ISO 31000 principles can significantly enhance an organization’s ability to achieve and maintain other ISO certifications such as ISO 9001 (Quality Management Systems) – the most popular standard, ISO 14001 (Environmental Management Systems), and ISO 45001 (Occupational Health and Safety Management Systems). You can read more below to know how risk management can enhance your ability to achieve other ISO certifications.
IMS: Integrated Management System
Management of risks is one of the main principles mentioned in most of the ISO standards, which focus on risk-based thinking in implementing and maintaining the standards requirements. Therefore many ISO certifications can be obtained easily after obtaining the risk management certificate of conformity.
An Integrated Management System (IMS) that incorporates ISO 9001, ISO 14001, and ISO 45001 can benefit greatly from a unified risk management approach as outlined in ISO 31000. By applying a consistent risk management framework, organizations can systematically identify, assess, control and monitor risks across various domains – quality, environment, and occupational health and safety. This complete approach not only ensures compliance with multiple ISO standards but also promotes a culture of continual improvement, operational efficiency, and proactive risk mitigation. Integrating ISO 31000 within an IMS enables organizations to align their strategic objectives with their risk management processes, ensuring a balanced focus on quality, environmental sustainability, and workplace safety.
Practical Steps to Implement Risk Management
- Establish the Context
Understand the internal and external environment in which your organization operates. Define the scope, objectives, and criteria for the risk management process. This can provide a clear understanding of the context in which risks need to be managed.
- Risk Identification
Identify potential risks that could affect the achievement of company objectives. This involves gathering information from various sources, including historical data, expert opinions, and stakeholder inputs, and using techniques such as brainstorming, SWOT analysis, and checklists to identify risks comprehensively.
- Risk Assessment
Evaluate the identified risks to determine their likelihood and impact. This involves analyzing the potential consequences and the probability of occurrence. Risk assessment helps prioritize risks based on their significance and the need for management / corrective actions.
- Risk Treatment
Develop and implement strategies to manage risks. This could include avoiding, reducing, transferring, or accepting risks. The strategies for risk treatment depend on the organization’s risk appetite and the effectiveness of available controls.
- Monitoring and Review
Continuously monitor and review risks and the effectiveness of risk management strategies. This ensures that the risk management process remains dynamic and responsive to changes in the risk landscape. Regular reviews help identify new risks and assess the effectiveness of existing controls.
- Communication and Consultation
Effective communication and consultation with stakeholders is vital throughout the risk management process. This ensures that everyone involved understands the risks, decisions made, and their roles in managing those risks. It also fosters a culture of transparency and accountability.
Conclusion
Effective risk management is essential for organizational resilience and success. By adhering to the principles outlined in ISO 31000, organizations can develop a robust risk management framework that not only protects them from potential threats but also helps them capitalize on opportunities. Whether you are pursuing ISO 9001, ISO 14001, ISO 45001, or any other ISO certificate, integrating the risk management principles will enhance your organization’s ability to achieve its objectives and maintain sustainable growth.
At UCS, we are committed to helping organizations implement effective risk management practices and achieve ISO certifications. Our team of experts is here to support you on every step through the way. Contact us today through our website or via email to learn more about our services and how we can help you build a resilient and successful organization through implementing ISO 31000.
