There are a number of risks that can impact on the success of an organization’s goals. These goals can be related to several activities of the organization, from strategic initiatives to operations, processes and projects. They can also reflect in social, environmental, health and safety, commercial, financial, economic and company reputation areas.
I wrote a very thorough article on the main applications of risk management within organizations. If you would like to read it, you can access it here:
But in the post below, you can find an interesting summary of this article.
Enterprise Risk Management (ERM) is a methodology that has the ability to integrate and manage the various risk categories and their applications. This integrated approach greatly facilitates the lives of managers. With ease, methods and terminologies can be applied in very distinct areas, producing results previously unimaginable without enormous effort.
Let’s have a look at some applications.
A good risk management process enhances the company’s ability to achieve its goals by managing the obstacles that hinder the attainment of annual strategic goals.
Risk management is an important part of project management. According to PMBOK, of the Project Management Institute, risk management is one of the ten areas of knowledge in which a project manager must be competent. Project risk is defined by PMI as “an uncertain event or condition that, if it does occur, has a positive or negative effect on project objectives.”
Governance and Compliance
Historically, organizations have addressed their risk and compliance initiatives as independent processes. With the growing focus on corporate governance and corporate risk management, organizations have begun to look for technologies that can provide sustainability, efficiency and consistency in risk management and compliance, and that are represented by the GRC (Governance, Risk and Compliance) approach.
Health, safety and the environment
In order to promote a safer working environment and to maintain compliance with regulatory standards, such as OHSAS 18000 and ISO 14000, companies need to quickly and efficiently identify and mitigate all incidents that occur. However, it can be difficult to determine which threats pose the most critical risks and also which risks are less dangerous to the organization.
Transparency in processes is at the heart of regulatory compliance and quality management. If it is unclear how a business operates (who does what, why, and when), the organization is not able to implement controls, policies, procedures and audits to support operational excellence. But even with all processes mapped and well described, many problems may still arise. For this reason, risk management also becomes important in the modeling of business processes.
Risk-based asset management is an emerging area that has grown over the last decade. It has proven to be effective, not necessarily by reducing risks, but by using risk to balance the operational performance of assets with the cost of the asset’s life cycle.
Risk management practices have come to be part of all areas of organizations. Even with some unique characteristics in each application, the fundamentals are the same, and this allows for their unified and shared use. It is no longer an option: a centralized environment that allows all areas to use the same language to talk about risks and share their experiences has become mandatory.
Are you interested in reading the full article? In it you will find much more information on each application, as well as two other applications that were not mentioned here in this post. You can access it here.