Risk Management Framework

The purpose of the risk management “framework” described in ISO 31000:2018 is to help the organization integrate risk management into its significant activities and functions.

The effectiveness of risk management depends on its integration into the governance of the organization, including decision-making, which requires support from top management.

Framework development includes 1) integrating, 2) designing, 3) implementing, 4) evaluating, and 5) improving risk management across the organization.

1. Integration
Integrating risk management relies on an understanding of organizational structures and context. These structures differ depending on your purpose, goals, and complexity. Risk is managed in every part of the organization’s structure. Everyone in an organization has responsibility for managing risk.
Integrating risk management is a dynamic and iterative process. It should be customized to the organization’s needs and culture. Risk management should be a part of, and not separate from, the organizational purpose, governance, leadership and commitment, strategy, objectives, and operations.

2. Design
When designing the framework for managing risk, the organization should examine and understand its external and internal context.

Top management should demonstrate and articulate their commitment to risk management through a policy, a statement, or other forms that clearly convey the organization’s objectives and commitment to risk management.

Top management should ensure that the responsibilities for relevant roles with respect to risk management are assigned and communicated at all levels of the organization.

Communication and consultation should be timely and ensure that relevant information is collected, collated, synthesized, and shared, as appropriate, and that feedback is provided, and improvements are made.

3. Implementation
The organization should implement the risk management framework by developing an appropriate plan including time and resources.

Successful implementation of the framework requires the engagement and awareness of stakeholders. This enables organizations to explicitly address uncertainty in decision-making, while also ensuring that any new or subsequent uncertainty can be taken into account as it arises.

Properly designed and implemented, the risk management framework will ensure that the risk management process is a part of all activities throughout the organization, including decision-making, and that changes in external and internal contexts will be adequately captured.

4. Evaluation
To evaluate the effectiveness of the risk management framework, the organization should periodically measure the risk management framework performance against its purpose, implementation plans, indicators, and expected behavior.

5. Improvement
The organization should continually monitor and adapt the risk management framework to address external and internal changes, and therefore improve its value.

The organization should continually improve the suitability, adequacy, and effectiveness of the risk management framework and the way the risk management process is integrated.

ISO 31000:2018
See ISO 31000:2018, “Risk Management – Guidelines”, for more details on establishing a risk management program. You can order the standard at this ISO web page for about $90.