What is ISO 31000 Risk Management
To answer what ISO 31000 specifically is let’s first define risk management.
Risk management can, in simple terms, be defined as managing uncertainty. Every day, in both our personal and professional lives we manage risk. We make decisions considering the possible effects of uncertainty.
Another way of thinking about risk management is that risk management means managing the decisions you need to make in order to achieve the objectives you want to achieve.
The formal definition of risk management is:
Coordinated activities to direct and control an organization with regard to risk.
All organizations manage risk whether formally or informally. ISO 31000 helps your organization manage risk systematically and formally.
ISO 31000 Standard is a formal system for managing risk. It is a systemized matrix that allows you to achieve your objectives.
ISO 31000 International Standard provides guidelines on how to efficiently manage risk faced by organizations.
The numbers 31000 are completely arbitrary, they don’t mean anything.
The first ISO 31000 was created in 2009 and provides the best practices for organizations to manage risk. An international committee of expert risk management professionals evaluates, writes, and reviews the standard and it is updated every 5 years.
The most current ISO 31000 standard is ISO 31000: 2018.
The ISO 31000 is real worldly rather than philosophical and focuses on objectives in the organizations. Simply, if your organization has specific objectives, you need to manage uncertainty.
If your organization has objectives, you need to manage uncertainty.
The focus of ISO 31000 is on continuous improvement while managing uncertainty systematically and effectively.
ISO 31000 consists of:
4 step iterative framework
6 component iterative process
Why manage risk at all? And Why ISO 31000 over any other system?
Why manage risk?
Managing risk helps you achieve your objectives and helps you prevent the uncertainties from stopping you from achieving your objectives.
All activities of an organization involve risk. Do you know exactly what to do, what the budget is, what the customer is going to do, etc. – at all times?
There are internal and external factors and influences such as budgetary, human resources, customer requirements that make it uncertain whether and when an organization will achieve its objectives.
All organizations manage risk to some degree. Why because you want to achieve your objectives.
Not all organizations manage risk in a formal fashion. However, it may not be the most effective way to manage risk.
The adoption of consistent processes within a comprehensive framework, such as ISO 31000 can help to ensure that risk is managed effectively, efficiently, and coherently across an organization.
The reason why you want to manage risk in a formal fashion is to ensure that all of your people are effectively managing the uncertainties that will determine whether or not you will achieve our objectives.
The advantages of ISO 31000 over all the other systems
- ISO 31000 is a systematic and logical process for managing risk
- It’s a simple blueprint for implementing in your organization
- A methodology that focuses on the company vision, mission, and objectives
- It is an all-inclusive framework; any organization can implement the principles, regardless of the organization’s size or sector
- High-quality standards; ISO is internationally recognized for codifying exceptional standards
- Continuous improvement; ISO 31000 can be used throughout the life of an organization because of its cyclical nature and focus on long-term success
- Easily applicable; they guidelines can be applied to all aspects of an organization and it uses simple terminology
- Tailored information; ISO 31000 takes into account human and cultural factors to make the principles fit into organizations globally
Even if an organization already has a formal process for managing uncertainty you can use ISO 31000 to carry out a critical review of its existing practices and processes.
ISO 31000 is not mandatory in the United States, so ISO 31000 is a voluntary framework or standards and guidance. Some countries such as Canada, Australia, and New Zealand have mandatory governance requirements: ISO 31000 must be used.
Risk management can sound complicated and confusing, especially when attempting to comprehend it by reading articles.
Here is a video that may be helpful in simplifying the concept of what risk management and ISO 31000 are.
This video is from an lecture and it’s also the easy-to-follow and understand format of our Learn 31000 training course.
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