Fundamentals of Risk Management PDF

Fundamentals of Risk Management Based on ISO 31000:2018 Risk Management Guidelines Ms. Kathrine Camille Nagal, MBA Facilitator Intended Learning Outcomes At the end of this session, the students are expected to: Explain the Principles, framework and process of...

Fundamentals of Risk Management Based on ISO 31000:2018 Risk Management Guidelines Ms. Kathrine Camille Nagal, MBA Facilitator Intended Learning Outcomes At the end of this session, the students are expected to: Explain the Principles, framework and process of Risk Management Identify, analyze, evaluate, treat the organizational functional, and/or process risks Monitor, review, record, and report the actions to address the risks and opportunities. Risk-Based Thinking Risk-Based Thinking Something we all do automatically and often sub-consciously Part of the process approach that makes preventive action part of one’s routine Risk is often negatively viewed – risk-based thinking helps identify opportunities and is considered as the positive side of risk Essential for achieving an effective quality management system which requires an organization to plan and implement actions to address risks and opportunities When addressing both risks and opportunities, a basis for increasing the effectiveness of the quality management system, achieving improved results and preventing negative effects is established. ISO 9001:2015 The concept of risk has always been implicit in ISO 9001 – the 2015 revision makes it more explicit and builds it into the whole management system The main objective of ISO 9001 is to provide confidence in the organization’s ability to consistently provide customers with conforming goods and services and to enhance customer satisfaction. The concept of risk in the context of ISO 9001:2015 relates to the uncertainty of achieving such objectives. The concept of opportunity in the context of ISO 9001 relates to exceeding expectations and going beyond stated objectives. How to implement Risk-Based Thinking into your organization? 1. Identify what the risks and opportunities are in your organization - this depends on the context or your organization. 2. Analyze and prioritize the risks and opportunities in your organization - identify what is acceptable and what is not. 3. Plan actions to address the risks. Can the risks be avoided, mitigated or eliminated? 4. Take action and implement the plan to address the risks. 5. Check the effectiveness of your plan 6. Continual Improvement Introduction to Risk Management Organizations of all types and sizes face external and internal factors and influences that make it uncertain whether they will achieve their objectives. Managing risk is iterative and assists organizations in setting strategy, achieving objectives and making informed decisions. Managing risk is part of governance and leadership and is fundamental to how the organization is managed at all levels. It contributes to the improvement of management systems.  Introduction to Risk Management Managing risk is part of all activities associated with an organization and includes interaction with stakeholders. Managing risk considers the external and internal context of the organization, including human behaviour and cultural factors. Terms and definitions Risk - effect of uncertainty on objectives Risk management - coordinated activities to direct and control an organization with regard to risk. Stakeholder (interested parties) - person or organization that can affect, be affected by, or perceive themselves to be affected by a decision or activity. Risk source - element which alone or in combination has the potential to give rise to risk Event - occurrence or change of a particular set of circumstances. Likelihood- chance of something happening. Control - measure that maintains and/or modifies risk Figure 1. Principles, framework and Process of Risk Management  Principles The purpose of risk management is the creation and protection of value. It improves performance, encourages innovation and supports the achievement of objectives. The principles are the foundation for managing risk which should enable an organization to manage the effects of uncertainty on its objectives. Figure 2 — Principles  Principles a. Integrated - integral part of all organizational activities. b. Structured and comprehensive - contributes to consistent and comparable results. c. Customized - the framework and process are customized and proportionate to the organization’s external and internal context related to its objectives. Principles d. Inclusive - appropriate and timely involvement of stakeholders enables their knowledge, views and perceptions to be considered, resulting to improved awareness and informed risk management. e. Dynamic - anticipates, detects, acknowledges and responds to changes and events in an appropriate and timely manner. Risks can emerge, change or disappear as an organization’s external and internal context changes.  Principles f. Best available information - The inputs are based on historical and current information, as well as future expectations. Information should be timely, clear and available to relevant stakeholders. g. Human and cultural factors - Human behavior and culture significantly influence all aspects of risk management at each level and stage. h. Continual improvement - continually improved through learning and experience.  Risk Management Principles Review The principles are the foundation for managing risk and should be considered when establishing the organization’s risk management framework and processes. These principles should enable an organization to manage the effects of uncertainty on its objectives. Figure 2 — Principles Reference ISO 31000:2018 Risk management — Guidelines. International Organization for Standardization, Switzerland. Retrieved from https://www.iso.org/obp/ui/#iso:std:iso:31000:ed-2:v1:en www.youtube.com