Key Components of a Risk Management System
Risk management requires organization support, an assurance framework and the ability to manage a collection of risks and opportunities. An organization that is successful in implementing an effective risk management system will recognize that there is an upside and a downside to risk.
In order to benefit from a robust risk management system, there are five key components that an organization is required to implement. It should:
- Ensure executive management support and understanding
- Consider risk in objective setting and decision making
- Make the management system transparent, inclusive and accessible to all
- Continually sense change and respond accordingly
- Ensure that engagement is systematic, timely and sustainable
Ensuring these five key components comes with its own challenges.
Organizations face the challenge of ensuring that the terminology and methodologies are widely understood and consistently applied. All risk must be systematically evaluated, assessed and managed effectively and risk management and understanding must be widely adopted in all disciplines across the organization.
Risk management is an on-going process, and organizations must be ever ready for scrutiny and able to stand up to audit, as well as to ensure that learning from every incident is shared.
For effective risk management, organizations must avoid storing information in disconnected systems, formats and locations and make sure that change is managed and communicated effectively. Organizations are also open to exposure from actions that are not assigned or completed while time intensive and error prone reporting processes could be harmful, or even fatal, to the business