ISO 31000 is an international standard that provides risk management principles and guidelines. The ISO 31000:2009 risk management standards, the Principles and Guidelines, laid out principles, a structure and a risk management method that every company should use. A variety of risks are revealed to all organisations, which render them vulnerable and prevent them from properly achieving their goals. Therefore, certain authorities are required to keep a check on it.
What is ISO 31000?
ISO 31000 Objectives
The framework of ISO 31000
Risk Management Principles
Innovative areas of Risk Management
What is ISO 31000?
The International Organisation for Standardization ( ISO) established ISO 31000 in November 2009 to provide a universally-regarded standard that can be used by any entity in order to efficiently handle these risks, offering a generic approach by setting standards and guidelines for handling any risk in a systematic, clear and reliable way, and in any context. The use of “context-sets” is a crucial aspect of this International Standard.
ISO 31000 sets out a range of standards which must be met in order to ensure efficient risk management. These are divided into risk management concepts, the structure and the risk management mechanism itself.
ISO 31000 Objectives
ISO 31000 is intended to be suitable for all public undertakings, private businesses, associations, groups or individuals. If ISO 31000 is effectively introduced and managed by an organisation, then:
- increase the likelihood of achieving objectives;
- encourage proactive management;
- be aware of the need to identify and treat risk throughout the organization;
- improve the identification of opportunities and threats;
- comply with relevant legal and regulatory requirements and international norms;
- improve mandatory and voluntary reporting;
- improve governance;
- improve stakeholder confidence and trust;
- establish a reliable basis for decision making and planning;
- improve controls;
- effectively allocate and use resources for risk treatment;
- improve operational effectiveness and efficiency;
- enhance health and safety performance, as well as environmental protection;
- improve loss prevention and incident management;
- minimize losses;
- improve organizational learning; and
- improve organizational resilience
The framework of ISO 31000
The ISO 31000 Structure represents the PDCA (Plan, Do, Check, Act) cycle common to any design of the management system. However, the standard states: “This Framework is not intended to prescribe a management system, but rather to assist the organisation to integrate risk management into its overall management system”. This declaration should foster flexibility among organisations to integrate system elements when appropriate.
The framework’s key elements include:
- Governance and strategy
- Provides the mandate and reveals the organisation’s dedication
- Development of the software
- the ongoing growth of the overall risk management system
- Deployment
- Structure and software implementation of risk management
- Surveillance and review
- Structure and performance control of the management system
- Ongoing enhancement
- Improvements in management system efficiency
Risk Management Principles
ISO 31000 does not explain how a risk management mechanism should be applied, planned and protected by the principles. ISO 31000 claims that these concepts should be implemented and adapted to the corporate context by an organisation. ISO 31000 is relevant for all organisations as a reference document which can be used for all goods or services.
The 11 principles of risk management are:
- Risk Management establishes and sustains value
- Risk management is an integral part of all organizational processes
- Risk management is part of the decision- making
- Risk management explicitly addresses uncertainty
- Risk management is systematic, structured, and timely
- Risk management is based on the best available information
- Risk management is tailored
- Risk management takes human and cultural factors into account
- Risk management is transparent and inclusive
- Risk management is dynamic, iterative, and responsive to change
- Risk management facilitates continual improvement of the organization
The 11 ISO 31000 guidelines can be accomplished through a risk management solution:
- Is simple and convenient to use to ensure the timely entry of quality data for risk users.
- Offers practical perspectives for end-users that influence decision-making.
- Is versatile enough to adapt to the company’s needs and can be adapted to change companies.
Innovative areas of Risk Management
The 31000 standard innovates in many fields with respect to older risk management standards:
- It offers a new concept of risk as an impact of insecurity on the ability to achieve the objectives of the organisation, emphasises the importance of identifying objectives before attempting to manage the risks, and stresses the role of insecurity.
- It introduces the notion of risk appetite (sometimes controversial) or the amount of risk the company chooses to undertake, in exchange for the expected value
- Defines a system for risk management with various organisational processes, functions and responsibilities in risk management
- It defines the theory of management in which risk management is seen as an integral part of policy decision making and change management.