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The risk is inherent in operating. As a polymorphic phenomenon with dangerous and favorable points, the risk needs to be controlled through a systematic approach.
Here I’ll explain risk management in accordance with the ISO 31000 guidelines.
Risk consequences often go beyond you as an entrepreneur and may cause catastrophic events beyond your imagination. Think about the global financial crisis in 2008, which initially seemed only not by failure to perform a commitment in the mortgage industry. It is critical that you just are the person responsible for the events caused by the risk you have.
Entrepreneurs and startups assume that well -established enterprises have sufficient resources and maturity to implement systematic approaches to risk management or that it goes beyond the capability of startups. However, ISO standards They are general, which suggests that firms, no matter their size or industry, can implement the best global practices, adapting them to their business practices.
What is the risk?
There are different risk definitions, but simply means uncertainty. The level of risk in any dimension of a business initiative depends directly on the level of data on this dimension.
In contrast to what people often take on risk, this is not all the time a negative event. Risk may present itself as a threat or opportunity. Risk management is a continuous group of known and unknowns.
The ultimate goal of each risk management program is a proactive decrease or increasing the likelihood or impact of uncertain events – reducing it in the event of a threat and increasing it on the occasion.
What is a risk management system?
We live and do business in a fast, consistently changing era, and uncertainty is inseparable.
Although this constant evolution brings that emerging unknown and associated uncertainty, it is not effective to assess the risk only when starting a recent undertaking or through periodic risk assessments.
The consistently changing world prompts us to adopt continuous risk management processes that are possible through the PDCA cycle in ISO standards.
The PDCA Deming cycle, in the context of the ISO -based risk management system, enables iterative progress in planning (P) for repair activities (A), ensuring continuous risk assessment, evaluation and treatment, while enabling continuous monitoring and improving the system as a whole.
Implementation planning: Set the product -based context
Planning the implementation of the risk management system using ISO 31000 includes determining the context of the system. As I discussed, ISO standards are general and will be adopted by any form of organization, no matter its sector and the size of the company.
What determines the context of the system is the purpose of your company. Your business scope and attributes related to them determine the context of the risk management system.
If you are a business organization that produces various varieties of products (goods or services) for different industries, the context of the risk management system needs to be limited to the limits of a specific product or industry.
Even in the case of a small company with one product, it is more strategic to define the range and boundaries of the system based on the product itself, not the entire company.
Identify interested parties and their requirements
Each business initiative is a structured response to market demand, no matter whether it is unused or has the possibility of a more satisfying solution than what competitors offer.
To properly satisfy market demand, a business organization must meet various requirements that go beyond customer preferences.
While customers’ needs are one of the company’s major requirements, other critical requirements must even be justified in relation to the needs of shoppers. Filling out the business goal requires meeting all requirements specific to this product or business enterprise.
These include:
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Internal obligations to shareholders and employees
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External restrictions in contacts with suppliers
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Adjustable requirements
These authorities are interested in your activities, and the existence and development of your company depend on meeting their requirements. A successful business must balance all these requirements, while ensuring market competitiveness.
These requirements are attributes of business dimensions and you won’t ever achieve complete certainty for various possible situations you can encounter when meeting these requirements.
The structured ISO 31000 approach allows you to maintain consistency in management of uncertainty related to your competence in meeting these requirements.
ISO 31000 integration with business practices conducts
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Identification of all interested parties
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Identification of specific requirements of each identified body
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Maping of attributes of each requirement for appropriate business processes.
“What if?” scenarios
Scenarios “what if” will appear in the game when you review likely events that you just are unsure, assess the likelihood of their occurrence and assess their impact if they occur.
The “What IF” review scenarios helps to assess likely events by multiplying their probability and influence. The resulting results allow priority to treat likely events. Events in high results are qualified for further evaluation and appropriate treatment.
Treatment: Risk control project
There are several types of treatments:
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Mitigation – where you choose to improve the procedure and business process that may cause a likely event, implementing control over it
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Adoption – When you accept the risk, without taking any motion and placing them on the watch list until you receive more information
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Carry – where you share the risk in the type of a contract model, similar to a joint undertaking or simply insurance, although the latter is difficult in terms of risk and responsibility
The ISO 31000 standard needs to be integrated with targeted business processes for effectiveness, which suggests that the implementation of ISO 31000 adds the structure of business processes. Monitoring the management system in terms of continuous improvement ensures consistency between business processes and the requirements of those interested in your company and controls non -compliance by implementing repair activities in the system.