ISO 31000 is a risk management system that is intended to create and protect value within an organization. It provides guidelines that help businesses manage risk in order to make better decisions within the enterprise.
The ISO 31000 risk management standard can be broken down into two major components; the framework and the process. The framework lays the essential foundation for implementing the process. The process is the procedure that carries out the management of risk. These two crucial components are interdependent, and cannot stand alone. Because of this, organizations should be wary to not skip the creation of a strong framework and jump right into the process.
Elements of Framework
Establishing a sturdy framework will provide stability and endurance for an organization’s risk management process. There are several basic elements to consider when creating an ideal framework;
Policy – risk management mandates show the organization’s commitment to the process
Implementation – embedding risk management into all aspects of the organization
Record and Review – monitoring and keeping track of the process performance
Constant Improvement – regularly analyzing performance and improving it
These elements can be implemented based on the organization’s goals. They are meant to aid in the forming of a totally customized risk management process, relative to the organization’s internal and external context.
There are also fundamental elements that must be applied when building the framework, these are as follows;
Management Commitment – developing a formal policy, identifying and allocating needed resources, the creation of a cycle to review and maintain the process
Customized Program – establishing a process that fits the organization’s culture, capabilities, industry trends, and stakeholder expectations.
These key elements will support the organization’s ability to sustain a risk management process long-term. The framework of ISO 31000 replicates the PDCA cycle; plan, do, check, adapt. Thus, organizations should remain flexible and apply the basic elements as needed to assist the achievement of objectives.
In order to design a lucrative and efficient risk management framework, ISO 31000 consists of eight principles that provide concepts to guide the organization. These principles outline the ideal characteristics of a risk management framework.
The incorporation of the eight principles of ISO 31000 into the risk management framework will yield any organization consistent results. These principles are based on the creation and protection of value, therefore every part of risk management should be built upon them.
The ultimate goal of the ISO 31000 standard is to create and protect value within an organization, starting with a strong framework which then leads to the actionable steps seen in the process. The framework and the process are each reliant on the other; a truly effective risk management system applies both pieces in conjunction.
The establishment of a successful framework considers the major elements as well as the eight fundamental principles of ISO 31000. A secure framework is a groundwork for a stable, long-term risk management process. ISO 31000 framework is immensely important, and for that reason, organizations must be careful not to rush through it.