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At the end of 2009, the International Organization for Standardization (ISO) issued
a new set of principles and guidelines that should benefit all organizations confronting
the always problematic challenges of managing risk:
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Standard ISO 31000 provides principles and generic guidelines on risk management
and is not intended for the purpose of certification. ISO/IEC 31010:2009 describes
more than thirty tools to use for risk assessment and explains their application.
The ISO Guide 73:2009 contains risk management terminology and definitions. These
three standards can be applied to any type of risk, whatever its nature, by organizations
of any type or by individuals.
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Risk, as defined by the ISO Guide 73:2009, is the impact of uncertainty on objectives.
It is very important to emphasize that the impact of uncertainty can be positive
as well as negative. "Not pursuing an opportunity" is also a risk.
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John Shortreed **, PhD, who served on the ISO technical
committees for Guide 73 (Risk Management—Vocabulary, 2002) and its revision (2009)
as well as for ISO 31000 (2009), listed the following seven innovations introduced
by ISO series 31000:
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1. Formal principles for risk management and ERM (Enterprise Risk Management) that
can be used for measuring the risk maturity of an organization.
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2. Consideration of any risks or uncertainty that affects objectives of the organization,
whether they have positive or negative consequences.
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3. Organizational ability to tailor risk management to its own internal structure
and governance processes.
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4. Principle-based rather than performance-based.
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5. Requires an organization to formalize and continuously improve a framework for
ERM that integrates the management of risk into all processes in the organization.
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6. Updates the risk management process used for assisting any decision through the
five steps of context, risk assessment, risk treatment, communication, and consultation,
followed by formal monitoring and review.
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7. Requires accountability for any and all risks through the designation of a “risk
owner” whose annual performance partly depends on how well risk is managed.
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As part of implementing an Enterprise Risk
Management program, I’m trying to align Sr. management by providing them with ISO
31000 training. I would appreciate if you can recommend trainers /firms that can
provide this service.
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There are two reasons I cannot recommend trainers/firms
for ISO 31000 training.
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1. I am not sure where your organization is in terms of risk maturity, context,
existing risk management, etc. and
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2. My knowledge of training organizations is very limited and so mentioning one
or two would not be helpful. As with all such selections the first rule is to know
the answer to 1. This will ensure that you have an understanding of where your organization
is, what it needs in the way of training to implement 31000 and how you might assess
the variety of offers available.
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So let me comment on 1. Where is your organization? The first step is to
get a copy of ISO 31000 (available on line from most National Standards Organizations,
e.g. Canada or Australia), read it over and as you read make checkmarks or comments
against the text. Once you have done that you will have a once over crude gap analysis,
a list of questions, and so idea of the extent of the task ahead.
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Since your current focus is senior management the starting point may be an understanding
of their objectives and the context and environment in which they go about making
decisions as well as the nature of those decisions and the associated risks.
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It may be helpful to look on the web and see if you can find some background material
to help you on the context part for the decision you have to make – How to engage
senior management in ERM (31000 style)? According to ISO 31000 there is a structured
way of considering the risks for any decision including the risks behind your current
decision to assist senior management with 31000.
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For example a person I know who, John Fraser, has been quite successful in ERM and
has written a book last year (I did a chapter for 31000) can be seen in a presentation
that hits most of the key “how to get started” things he has found useful in doing
ERM in an organization. I caution you that his organization has a relatively straightforward
structure and set of day to day tasks so for other more complex organizations the
task is more complicated. Also he uses older terminology (understandable since it
was prior to 31000). However, it is a good place to start.
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http://events.grantthornton.ca/ERM2010/video_101202.cfm
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I would stress one of the main messages of ISO 31000 – the decision-maker is in
charge – and so one of the first steps is to get as much of the picture as possible.
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As you surf the web you will find, like the John Fraser presentation that most of
the sites want to sell you something, which is good in a way but it does mean that
you need to have a good understanding of your needs. For example, one other site
you might look at as you begin surfing the web is http://www.broadleaf.com.au/iso31000/index.html which is
done by an organization where Grant Purdy works – he heads up the Australian New
Zealand standards committee for risk management and as you may know their standard
was the starting point for ISO 31000. Grant also put ERM into one of the world’s
largest mining companies in just 4 years with 3 people – similar to John Fraser’s
experience with Hydro1 – a facilitation role with relatively small staff but with
senior management commitment.
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Please ask me any follow up questions. Also a little general description of your
organization would be helpful as would be the assessment of the present level of
risk maturity (see Annex A of 31000 for help there).
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I have a copy of the ISO 31000. Does the
organization or the Risk Manager have to establish and publish the Risk Policy and
the Risk Objectives? How specific do they have to be? Thank you.
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31000 in section 4.3.2 Establishing the risk management
policy (statement of the overall intentions and direction of an organization related
to risk management) reads as follows:
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The risk management policy should clearly state the organization's objectives
for, and commitment to, risk management and typically addresses the following:
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the organization's rationale for managing risk;
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links between the organization's objectives and policies and the risk management
policy;
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accountabilities and responsibilities for managing risk;
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the way in which conflicting interests are dealt with;
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commitment to make the necessary resources available to assist those accountable
and responsible for managing risk;
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the way in which risk management performance will be measured and reported; and
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commitment to review and improve the risk management policy and framework periodically
and in response to an event or change in circumstances.
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The risk management policy should be communicated appropriately.
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Since it is in the framework section it is an organization task this is likely put
together by the Chief Risk Officer working with senior management and the Board
who will adopt it, but this will depend on the organization. Note that with 31000
Risk management is integrated into the organization and so depending on the structure
of the organization the risk management will necessarily follow the specific organization’s
structure and processes. This means that every organization may be unique, although
they will (hopefully) follow 31000 and it will be possible to map the risk management
framework established in clause 4, to the terminology and generic framework of 31000.
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In terms of how specific the statement should be the old rule of “short as possible
while preserving clarity” should be followed.
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This URL (BHP Billiton’s web site) is a typical example of a policy
similar to a risk management policy (some of the items in the 31000 list are missing)
for a large company – it is renewed each year (see also comments by John Fraser’s
video earlier on the blog) and in this instance covers a variety of “objectives”
set out by the organization. I did not do it but likely if you search around BHP’s
web site you may find a structured and nested set of objectives and policies – typical
of an organization that has a good risk culture.
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Last but not least it is probably incorrect to speak of “risk objectives” There
will be at the level of risk management of individual risks (i.e. in clause 5) in
the risk management context section 5.3.4 Establishing the context of the risk management
process some details of the risk management process to be used for a specific
risk that ensure that the organizations policies for risk management are followed.
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In the next few years while ISO 31000 (hopefully) becomes the norm, it might be
a good idea to review risk terminology in general to be sure that the term and associated
definition is what is meant. It may be necessary to insert the existing meaning
as for example – “risk treatment (mitigation)” or in your question “risk management
policy (risk policy)”. My experience is that many of the differences in risk and
risk management are really differences in terminology not in substance.
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Do you have information on risk management
with respect to organizational structure and impartiality for an organization that
offers ISO 9001 registration services?
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Not sure I understand the question – an organization
that offers ISO 9001 registration – and risk management with respect to organization
structure and impartiality. I think the question is – Suppose an organization exists
to register other organizations for compliance with regulation x or certification
y (does not really matter if it is 9001 or pollution regulation, or whatever, the
situation is the same) how can they assure others that they are impartial and how
is this expressed in their risk management framework and organizational structure?
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Since the business of the organization is certification or assurance of compliance
their organizational objectives will have this front and centre – they are not likely
to exist for very long if they do not meet this objective (otherwise there will
be complaints, investigations, their clients may realize difficulties with regulators,
suppliers, and switch providers, and so forth). The structure of the organization
will take many forms but likely involves clear statements of policy and procedures
for audits/certifications, supervision and possible repeating of audits/certification,
quality control of auditor/certification performance with remedial actions, forensic
like approaches to ‘partial’ outcomes, annual publication of performance outcomes
with regards to impartiality, etc.
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So the risk management for this objective will be to identify risks and then manage
those risks. Risks might include, for example:
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variable performance of auditors/certification due to unclear policies/communications,
lack of training,
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partiality and/or fraud due to lack of supervision and oversight of line operators,
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etc.
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These risks will be identified in the usual way – through review of historical data
(particularly the year to year results of audits/certifications if available), industry
wide data on complaints, review of processes to identify critical control points
for bigger risks, etc.) Then a process of generating risk treatments analyzing them
and evaluating them will result in optimized (with regard to objectives) procedures
for audits and certifications. There may also be modifications to the structure
of the organization if systemic problems are found.
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Name (First, Last):
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Title:
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Company:
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E-mail*:
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Questions/ Comments:
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Note: the address and message are
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**Ref: John Shortreed, PhD, has 30 years
of experience in risk management particularly over the last 13 years as the Canadian
representative to ISO Risk Terminology (Guide 73), and ISO 31000 a standard for
risk management. Other risk application highlights include the Krever committee
on the safety of the blood system today, NERAM international colloquium series on
Air Pollution and Health, conference on total quality for drinking water systems,
Canadian Standards Association risk management committee (Q850), member of Canadian
advisory committee on Xenotransplantation, risk assessment of emissions from Canadian
refineries, application of Life Quality Index, risk analysis of dangerous goods
and risk solutions for Canadian waterways.
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