Do you know what ISO 31000 is? This international risk management standard is essential when it comes to strategic planning and decision-making in organizations of all kinds.
In the business environment, each company faces a wide range of risks, which are directly influenced by the specifics of the market they operate in. Despite the considerable autonomy that each organization has in managing its risks, the market demands a measure of standardization to ensure the credibility of the actions taken and the results achieved.
It is in this context that the importance of ISO 31000, known as the International Risk Management Standard, emerges. This standard defines the fundamental principles of Risk Management, providing an essential framework for its implementation across various stages of organizational evolution. But how does this guideline work? Keep reading to understand!
What is ISO 31000 (International Risk Management Standard)?
ISO 31000 is an international standard in the field of risk management. Its primary purpose is to provide adaptable guidelines to any type of organization and its specific context. Unlike many other ISO standards, ISO 31000 stands out for its conciseness, making it a reference tool to guide decision-making processes, strategic planning, and effective risk management.
While many organizations already adopt some level of risk management, the best practices recommended by ISO 31000 are formulated to enhance and optimize these processes, with a greater focus on promoting workplace safety. Moreover, the standard covers comprehensive principles and guidelines that empower organizations to conduct detailed risk analyses and robust assessments, leading to more informed decisions and more efficient management strategies.
In other words, the implementation of ISO 31000 principles and guidelines not only improves operational effectiveness and organizational governance but also strengthens stakeholder confidence and reduces potential financial losses and damage to corporate reputation.
What are the principles of ISO 31000?
The principles of ISO 31000 offer a flexible framework, allowing each company to adapt the risk management approach according to its specific needs. Below are these principles:
Risk management should encompass all business activities and relationships, considering how risks impact every part of the organization.
2- Framework and Scope
The information collected throughout the risk management process needs to be treated methodically and comprehensively to achieve consistent results.
Each company has unique needs and goals. Therefore, the risk management strategy must be tailored to address these individual characteristics. For example, a technology startup and an energy company would have different approaches due to the distinct nature of their businesses.
Similar to corporate governance, it is crucial to promote fairness and include all stakeholders in risk management. This involves raising awareness of risk management practices and ensuring decisions are made considering the impact on all involved parties.
Agility is crucial for effective risk management. The process must be dynamic and flexible, allowing the company to quickly adapt to changes in the market, regulations, or other circumstances that may affect the risks it faces.
6- Quality of Information
Obtaining and using high-quality information is fundamental. Informed decisions rely on the accuracy and reliability of available data. For example, an insurance company needs accurate information about the risks covered in its policies.
7- Continuous Improvement
The pursuit of excellence must be ongoing. Through continuous review and optimization of the risk management process, the company can enhance its approaches and achieve increasingly better results. For instance, a restaurant chain might regularly review risks associated with food safety to ensure maximum customer safety.
These principles guide the ISO 31000 approach, providing a solid framework for organizations to develop risk management strategies that align with their unique circumstances.
Benefits Provided by ISO 31000
Organizations that adopt the standard’s guidelines can achieve a range of benefits, as the guidance established in ISO 31000 applies to various types of risks, including those within the context of the new General Data Protection Law. The benefits include:
- Increased operational efficiency.
- Improved performance of health and safety-related processes.
- Reduction of losses.
- Assurance of governance and stakeholder trust.
- Promotion of organizational proactivity across all areas.
- Establishment of a solid foundation for decision-making.
Applying risk management based on ISO 31000
Applying risk management based on ISO 31000 involves following a structured process with the following steps:
Step 1: Communication and consultation
In this phase, involving relevant stakeholders is crucial. This consists in raising awareness of the risks involved (communication) and obtaining their input for informed decision-making (consultation).
Step 2: Define scope, context, and criteria
Customize the risk management process for your organization. This includes defining which activities are covered by the process and considering the internal and external context of your business. Additionally, establish criteria that will help evaluate risks about the organization’s objectives.
Step 3: Assess risks
In this step, identify, analyze, and assess risks. Identification involves finding and describing the risks. Analysis requires understanding the nature of the risks, and considering factors such as probability, consequences, and volatility. The assessment compares the analysis results with the criteria defined earlier, aiding in decision-making, which might involve choosing between risk treatment options, conducting additional analyses, or maintaining existing controls.
Step 4: Treat risks
In this phase, select and implement strategies to address risks. Evaluate the effectiveness of the actions taken and determine whether the risk is acceptable or requires additional treatment.
Step 5: Monitoring and critical analysis
Ensure continuous quality and effectiveness of the risk management process at all stages. To do this, monitor the results of the actions taken, assess whether the process is functioning as expected, and conduct critical analyses to identify areas for improvement.
Step 6: Record and report
Finally, document the entire risk management process and its results. This not only fulfills reporting requirements but also provides a solid basis for improving communication and future decision-making. Additionally, consider the needs of different stakeholders when recording and reporting information.
By following these steps, you will be applying risk management according to ISO 31000 guidelines, which will help your organization make more informed decisions, deal with uncertainties more effectively, and enhance its resilience in the face of challenges.
When to implement ISO 31000-based Risk Management?
The standard provides guidelines that can be adapted and applied in a wide variety of situations where risk assessment, treatment, and monitoring are crucial. Below are some situations in which companies can benefit from applying ISO 31000:
Changes in organizational objectives
When a company reformulates its objectives and strategic goals, risk assessment becomes crucial to ensure that the new plans are achieved with minimal obstacles. In this context, ISO 31000 offers a framework to identify how risks can impact the newly defined objectives.
Internal and external transformations
As companies undergo internal transformations such as restructuring or expansion or are impacted by external changes like new regulations or intensified competition, ISO 31000 assists in evaluating and adapting existing risk management plans.
Important decisions that can influence the risks an organization faces, such as launching new products, entering new markets, or adopting new technologies, should be informed by risk assessment. The standard provides a structured process to assess these risks and make more informed decisions.
In environments where uncertainty is high, such as volatile markets or during economic crises, ISO 31000 offers a systematic method to identify emerging risks and take proactive measures to mitigate them.
Risk review and mitigation measures
Periodically, the company should review its understanding of existing risks and implement mitigation measures. This ensures that risk management strategies are up-to-date and effective as new information is acquired.
The standard can be used to assist companies in understanding and assessing risks associated with non-compliance with legal and regulatory requirements, ensuring ongoing compliance.
Any significant changes in company operations, such as process changes, suppliers, or technologies, can introduce new risks. ISO 31000 offers a method to identify and address these risks in a structured manner.
Use risk management software for ISO 31000 implementation
In a scenario where different areas need to work together, it’s crucial to have an organized approach when implementing ISO 31000-based risk management. An efficient way to do this is by using tools that track safety indicators, as this facilitates internal company operations.
The suggestion is to adopt risk management software that can gather and organize all the information. This provides essential resources for the risk management process to function well. With this solid foundation, the company can effectively deal with risks to employee health and safety. The Belt, risk management software, is an interesting option in this regard.
An additional advantage is that Belt helps to understand risks more accurately in each activity. This enables the creation of better plans to reduce these risks and implement controls that work.