You are on page 1of 61

ISO 31000:2009;

ISO/IEC 31010
& ISO Guide 73:2009
International Standards for the
Management of Risk
Kevin W Knight AM;



P 0 BOX 226, NUNDAH Qld 4012, Australia

Managing Risk
• We all manage risk consciously or unconsciously
- but rarely systematically
• Managing risk means forward thinking
• Managing risk means responsible thinking
• Managing risk means balanced thinking
• Managing risk is all about maximising opportunity
and minimising threats
• The risk management process provides a framework to
facilitate more effective decision making

The Pivotal Definition
effect of uncertainty on objectives

NOTE 1 An effect is a deviation from the expected — positive and/or
NOTE 2 Objectives can have different aspects (such as financial, health and
safety, and environmental goals) and can apply at different levels (such as
strategic, organization-wide, project, product and process).
NOTE 3 Risk is often characterized by reference to potential events and
consequences, or a combination of these.
NOTE 4 Risk is often expressed in terms of a combination of the
consequences of an event (including changes in circumstances) and the
associated likelihood of occurrence.
NOTE 5 Uncertainty is the state, even partial, of deficiency of information
related to, understanding or knowledge of, an event, its consequence, or

[ISO Guide 73:2009]

[ISO Guide 73:2009] . policy. device. NOTE 2 Controls may not always exert the intended or assumed modifying effect.risk owner person or entity with the accountability and authority to manage a risk control measure that is modifying risk NOTE 1 Controls include any process. or other actions which modify risk. practice.

___________________________________________________________________________________________ Obligation to carry out duties or Responsible decisions. . Yet to be defined Accountable Liability for the outcomes of actions or decisions NOTE: Includes failure to act or make decisions OR being obligated to answer for a decision OR obligation to answer for an action. or control over others as directed OR having the obligation to act OR obligation to carry out instructions.

7 1998.99: - http://www. Corporate Governance The way in which an organisation is governed and controlled in order to achieve its objectives. It is the glue which holds the organisation together in pursuit of its objectives while risk management provides the resilience. The control environment makes an organisation reliable in achieving these objectives within a tolerable degree of Queensland Audit Office – Report No.html .

framework and process .4.6) improvement and of the a enhancement of the Framework t Risk treatment organization (4.4) r o i) Transparent and (4.6) e n Risk inclusive v s evaluation j) Dynamic.2 Principles Framework Process (Clause 3) (Clause 4) (Clause 5) AS/NZS ISO 31000:2009 Figure 1 – Relationship between the principles.4.4) i d) Explicitly addresses Design of i t uncertainty framework c o e) Systematic.4.4) responsive to change e Monitoring l k) Facilitates continual w and review t (5. Risk a r structured and timely identification (4. iterative and i u (5.3) t i f) Based on the best (5.a) Creates value Mandate Establishing b) Integral part of and C the context (5.5) o n 5.2) m o c) Part of decision u Risk assessment n making n (5.5) i (5.3) c account Framework (4.3) organizational Commitment o M processes (4.2) i n available information o g g) Tailored Continual Implementing n h) Takes human and improvement risk Risk analysis & & cultural factors into of the Management (5.

Be tailored 8. Be capable of continual improvement and enhancement . Business Principles Approach AS/NZS ISO 31000:2009 Principles (Clause 3) Risk management should…. Create value 2. Be systematic and structured 6. Be an integral part of organisational processes 3. Be part of decision making 4. Explicitly address uncertainty 5. 1. Be based on the best available information 7. Take into account human factors 9. iterative and responsive to change 11. Be dynamic. Be transparent and inclusive 10.

• Protects value – minimise downside risk. .Risk management should create value • RM contributes to the achievement of objectives. protects people. systems and processes.

.Risk management should be an integral part of organizational processes • RM is not a stand-alone activity from the management system of the organisation. • RM is part of the process .not an „additional‟ compliance task.

• Helps allocate scarce resources. Risk management should be part of decision making • Risk management helps decision makers make informed choices. prioritize actions and distinguish among alternative courses of action. .

Risk management explicitly addresses uncertainty • Risk management explicitly takes account of uncertainty. and how it can be addressed. the nature of that uncertainty. . • RM addresses uncertainty. no matter the level of uncertainty.

timely and structured approach to the management of risk contributes to efficiency and to consistent. • The more aligned – the more effective and efficient. comparable and reliable results. .Risk management should be systematic and structured • A systematic.

Perfect information is not always possible. • Start with resources/expertise you have or gain easily. observation. forecasts and expert judgement. stakeholder feedback. • Information costs money. • Increase information as the level of risk increases. experience. . Risk management should be based on the best available information • The inputs to the process of managing risk are based on information sources such as historical data.

Risk management should be tailored • Risk management is aligned with the organization's external and internal context and risk profile. . • Context remains one of the most difficult areas. • Different risk appetites & different measurements.

Risk management should take into account human factors The management of risk recognizes the capabilities. perceptions and intentions of people that make every organisation different. .

• The management of risk must be clearly set out in job profiles/employment contracts and annual appraisals. Risk management should be transparent and inclusive • Appropriate and timely involvement of stakeholders at all levels of the organization. . ensures that the management of risk remains relevant and up-to-date.

. context and knowledge change. • Regular reviews of risk register and framework.Risk management should be dynamic. • Internal audit programme informed by corporate risk register. and others disappear. iterative and responsive to change • External and internal events happen. • Must keep RM relevant and accurate so as to support decisions and strategies. some change. monitoring and review take place. new risks emerge.

• RM maturity and improvement strategies should be included in the RM Plan. . Risk management should be capable of continual improvement and enhancement • Organizations should develop and implement strategies to improve the maturity of their management of risk alongside all other aspects of their management system.

• Therefore. . AS/NZS ISO 31000:2009 Risk management framework (Clause 4) • The framework in Clause 4 of AS/NZS ISO 31000:2009 is not intended to describe a management system. organizations should adapt the components of the framework to their specific needs. but rather. it is to assist the organization to integrate risk management within its overall management system.

RM RM Plan progress Against Plan RM Champions Governance reporting Identify Deviations and Risk. Control. PDCA – the starting point of any management system Commitment and Mandate Communicate and Train Policy Statement Plan Communications and Risk Management Plan Define & Analyse a reporting plan Assurance plan Training strategy Standards Problem and Identify the RM Network Procedures/Guidelines Root Cause Act Do Common Approach Devise a Solution Standardise Solution Develop Detailed Action Used in ISO Review and Define Management Plan & Implement It Next Issues Systematically System Standards Organise and Allocate Measure and review Check Board RM Committee Exec RM Committee Control assurance Confirm Outcomes Manager. Risk owners Benchmarking Assurance providers Performance criteria Issues .

3.2 Implementing the risk management process 4.4 Implementing risk management 4.6 Continual improvement of the framework 4.2 Establishing risk management policy 4.3.5 Resources 4.1 Understanding the organization and its context 4. Mandate and commitment (4.2) 4.5 Monitoring and review of the framework AS/NZS ISO 31000:2009 Figure 2 — Relationship between the components of the framework for managing risk .7 Establishing external communication and reporting mechanisms 4.4.1 Implementing the framework for managing risk 4.6 Establishing internal communication and reporting mechanisms 4.3.3 Design of framework 4.3 Accountability Integration into organizational processes 4.3.3.

Social. Legal. Technological. Environmental factors) . Economic.Understanding the organisation and its context • External Context –Consider: • Trends • Key drivers • Perceptions/values of key stakeholders • PESTLE: (Political.

skills and resources – Organisational culture – Contractual relationships . strategies and policies – Knowledge.Understanding the organisation and its context • Internal Context – Governance Structures – Objectives.

achievable. understandable and auditable with the clear mandate and commitment of top management • aligned to the organisation‟s culture with the risk makers and the risk takers the risk owners.Risk Management Policy • Must be simple. • Document components – Rationale and policy links – Accountability and responsibility – Management of conflicts of interest – Measurement of RM performance – Reporting processes – Policy review process/cycle .

Accountability • All accountable risk owners are clearly identified and provided with authority & resources to manage risk • Board accountability for framework implementation • Accountability of risk owners at all levels of the organisation clearly identified • Performance measurement processes in place • Reporting and escalation processes clearly established .

implementation plans. Integration into organisational processes • The management of risk should be part of routine organisational processes – Policy development – Business/strategic planning – Change management – Decision-making processes • Risk Management Plan – Organisation-wide – Linked to or integrated in to other plans: strategic plans. operational plans etc .

experience and competence – Time and funds: to execute the process – Defined processes. education and training programs . Resources • expenditure on the management of risk is an investment – Good RM will make an organisation more effective. methods and tools – Information systems – Awareness. but it requires dedicated resources • Resources include: – People: skills.

Establishing internal & external communication and reporting mechanisms • Internal – Ongoing awareness. education and training – Framework performance reporting and outcome reviews – Information management – Stakeholder engagement • External – Stakeholder engagement – Regulatory reporting requirements – Use reporting to build confidence – Business continuity (management of disruption related risk) communication .

Implementing risk management • Implementing the framework – Ensure • Appropriate timing • Alignment with organisational strategy and processes • Compliance with regulation – Apply to organisational processes – Train and educate staff – Communicate and consult • Implementing the risk management process – Define the process for the organisation – Implement at all levels (appropriate processes) – Establish a monitoring process .

. be embedded in culture and practices and tailored to the business processes of the organization. • includes five activities: communication and consultation. risk treatment. AS/NZS ISO 31000:2009 Risk management process (Clause 5) • should be an integral part of management. risk assessment. and monitoring and review. establishing the context.


5 RISK TREATMENT O 5.6 O M 5.2 RISK IDENTIFICATION M M What can happen.3 ESTABLISHING THE CONTEXT 5.2 External Context 5.3.4 RISK EVALUATION R O N E Compare against criteria.3.4. when.5. U I L Establish priorities.4. where.2 Selection of risk treatment options N 5.3. how & why U A O N S N I 5. E T A W T I 5.4 Risk Management Process Context 5. N Identify & assess options.3.5 Developing Risk Criteria C 5.4.3 Internal Context 5.2 5.3 RISK ANALYSIS 5. 5.4 S I C Determine existing controls T A R Determine Determine E T Likelihood Consequences O I I S R O S Estimate Level of Risk S N K M & & E C 5. T V S Decide on response.5.3 Preparing and implementing risk treatment plans AS/NZS ISO 31000:2009 Risk management process in detail .

2 C 5.5 RISK TREATMENT N AS/NZS ISO 31000:2009 Risk management process in detail .4.4.3 ESTABLISHING THE CONTEXT 5. 5.2 RISK IDENTIFICATION U A O N S N I I C 5.6 O M M M 5.3 RISK ANALYSIS E T O I I S R O S N S K M & & E C R O N E N T S 5.4.4 RISK EVALUATION V U I L E T A W T I O 5.4 S A T R 5.

University of Calgary. Jean Mulligan. mutual decisions with respect to … risk. Its aim is not to avoid all conflict or to diffuse all concerns. Risk communication seeks to improve performance based on informed. Alberta 1998 . Principles of Communicating Risks. Communicate & Consult Communicating risk successfully is neither a public relations nor a crisis communications exercise. The Macleod Institute for Environmental Analysis. Calgary. Elaine McCoy and Angela Griffiths.

when.e. activities • determine likelihood • risk management context • recognise risk areas • determine consequence/impact • risk criteria (i. threshold levels) • define risks • determine level of risk • define the structure • categorise risk Step 6 : Monitor and Review Risks Communicate and Step 4 : Evaluate Risks • process consult .Step 1 : Establish the Context Step 2 : Identify Risks Step 3 : Analyse Risks • external context • what can happen. where and how • identify controls • internal context • identify key processes. all steps • identify tolerable/unacceptable risks • environment (referring risk rating against risk criteria) • organisation • prioritise risks for treatment • strategy • stakeholders Accept/Retain Step 5 : Treat Risks Share • based on judgement or • insurance documented • outsourcing procedures/policy Avoid Reduce likelihood • consider discontinuing or • controls avoiding activity Reduce consequence • process improvement • consult • Business Continuity Plans • training & education • risk treatment preferable to • contractual arrangements • policies and communication risk aversion • public relations • audit and compliance Communication & Consultation in the risk management process .

3.4 RISK TREATMENT O N AS/NZS ISO 31000:2009 Risk management process in detail .2 External Context 5.3 RISK ANALYSIS S T A R E T O I I S R O S S N K M & & E C R O N E N 5.4. 5.3 Internal Context 5.3 ESTABLISHING THE CONTEXT 5.4 RISK EVALUATION T S V U I L E T A W T I 5.3.5 Developing Risk Criteria C 5.3.2 5.2 RISK IDENTIFICATION U A O N S N I I C 5.6 O M M M 5.4 Risk Management Process Context 5.4.

Establish the Context Objectives and environment Relevant Legislation Stakeholder identification & analysis Government Policy Corporate Policy Management Structures Community Expectations Criteria Consequence criteria .

experiences) Symbols

Rituals & An
Routines Organisation’s Power
Paradigm Structures

Systems Organisational

Adapted from Johnson & Scholes, 1993, p.61

C 5.6
5.4 S
K M &

AS/NZS ISO 31000:2009 Risk management process in detail

ISO/IEC 31010:2009
Risk Management - Risk Assessment Techniques

In particular, those carrying out risk assessments should be
clear about
• the context and objectives of the organization,
• the extent and type of risks that are tolerable, and how
unacceptable risks are to be treated,
• how risk assessment integrates into organizational
• methods and techniques to be used for risk assessment,
and their contribution to the risk management process,
• accountability, responsibility and authority for performing
risk assessment,
• resources available to carry out risk assessment,
• how the risk assessment will be reported and reviewed.

4. 5.2 C 5.4 RISK EVALUATION T V S U I L E T A W T I O 5. when.3 RISK ANALYSIS T A R E T O I I S R O S S N K M & & E C R O N E N 5.4 S 5. where.3 ESTABLISHING THE CONTEXT 5.5 RISK TREATMENT N AS/NZS ISO 31000:2009 Risk management process in detail .4.4. how & why U A O N S N I I C 5.2 RISK IDENTIFICATION M M What can happen.6 O M 5.

Technology/technical issues. Management activities and controls. Economic circumstances. Public/professional/product liability. Political circumstances. The activity itself. Natural and unnatural events.Identification of sources of risk Personnel/human behaviour. Commercial and legal relationships. .

4.4 S I C Determine existing controls T A R Determine Determine E T Likelihood Consequences O I I S R O S Estimate Level of Risk S N K M & & E C R O N E N 5. RISK IDENTIFICATION U A O N S N I 5.2 C 5.6 O M M M 5.3 RISK ANALYSIS 5.3 ESTABLISHING THE CONTEXT 5.4 RISK EVALUATION T V S U I L E T A W T I 5.5 RISK TREATMENT O N AS/NZS ISO 31000:2009 Risk management process in detail .

Preliminary analysis: Excluded Risks where possible should be listed. Purpose: Separate minor risks from major. Provide data to assist in evaluation. Risk Analysis Where possible confidence limits placed on estimates and the best available information sources are used. .

E T A W T I 5. N Identify & assess options.5 RISK TREATMENT O N ISO 31000:2009 Risk management process in detail .4. 5.2 C 5.4. T V S Decide on response.4 RISK EVALUATION R O N E Compare against criteria.2 RISK IDENTIFICATION U A O N S N I I C 5.6 O M M M 5.4 S 5.4.3 ESTABLISHING THE CONTEXT 5.3 RISK ANALYSIS T A R E T O I I S R O S S N K M & & E C 5. U I L Establish priorities.

Risk Evaluation Consider Objectives of projects and opportunities Tolerability of risks to others Whether a risk needs treatment Deciding whether risk can be tolerated Whether an activity should be undertaken Priorities for treatment Comparing levels of risk found in analysis with previously established criteria. .

2 Selection of risk treatment options N 5.4 RISK EVALUATION T V S U I L E T A W T I S RISK TREATMENT O 5.3 ESTABLISHING THE CONTEXT 5.3 RISK ANALYSIS T A R E T O I I S R O S S N K M & & E C R O N E N 5.2 C 5.6 O M M M 5. 5.3 Preparing and implementing risk treatment plans AS/NZS ISO 31000:2009 Risk management process in detail .2 RISK IDENTIFICATION U A O N S N I I C 5.4.

Risk Treatment Reduce Likelihood Consequence Continuity planning Sharing in full or part (this creates a new risk) Avoid (but not because of aversion) Retain residual .

4. 5.2 RISK IDENTIFICATION O U A N N S I 5.4 RISK EVALUATION U E L V T A I T I E 5.2 5.4 I C S A 5.3 RISK ANALYSIS E T T R O I I S O S R N S K M & E & C O N N T R S 5.6 C O M M M 5.4.3 ESTABLISHING THE CONTEXT 5.4.5 RISK TREATMENT O W N AS/NZS ISO 31000:2009 Risk management process in detail .

. Review is an integral part of the risk management process. Monitor and Review What may be of minor significance today may be the disaster of tomorrow.

RISK MANAGEMENT A Journey – Not a Destination .

security. safety & environment management. such as quality assurance. but as part of ‘Monitor and Review’ should be developed. Other interested stakeholders can also benefit from the risk process. not just as a risk control. The process is all about facilitating linkages between different stakeholders across the organisation .AS/NZS ISO 31000:2009 Extending The Process The role of assurance activity. This should go further than just audit.

are appropriately skilled and have adequate resources to check controls. review and the subsequent modification of processes. A pronounced emphasis on continuous improvement in risk management through the setting of organizational performance goals. . resources and capability/skills. fully defined and fully accepted accountability for risks. 2. controls and treatment tasks. systems. improve controls and communicate effectively about risks and their management to interested parties. monitor risks. AS/NZS ISO 31000:2009 Annex A (Informative) Attributes of enhanced risk management 1. measurement. Comprehensive. Named individuals fully accept.

4. AS/NZS ISO 31000:2009 Annex A (Informative) Attributes of enhanced risk management 3. comprehensive and frequent reporting of risk management performance to all “interested parties” as part of a governance process. whatever the level of importance and significance. Continual communications and highly visible. involves the explicit consideration of risks and the application of the risk management process to some appropriate degree. . All decision making within the organization.

Risk management is always viewed as a core organizational process where risks are considered in terms of sources of uncertainty that can be treated to maximize the chance of gain while minimizing the chance of loss. AS/NZS ISO 31000:2009 Annex A (Informative) Attributes of enhanced risk management 5. Critically. effective risk management is regarded by senior managers as essential for the achievement of the organization‟s objectives. The organization’s governance structure and process are founded on the risk management process. .

AS/NZS ISO 31000:2009 – Reducing the Risk in Risk Management • Avoids organisations re-inventing the wheel • Allows all to benefit from proven best practice • Provides a universal benchmark • Reduces barriers to trade • Advises exactly what you need to do and how you need to do it – no wasted effort and no false starts • Scalable – works for all sizes of organisation • Risk management = making optimal decisions in the face of uncertainty .

but will also allow silo/project risk management • Following AS/NZS ISO 31000:2009 will provide a low cost. And Finally!! • AS/NZS ISO 31000:2009 is the natural successor to AS/NZS 4360:2004 • It will fit „ERM‟ requirements. high chance of success approach to ERM • AS/NZS ISO 31000:2009 will add value and reduce risk in risk management • Managing risk is about creating value out of uncertainty .


The greatest risk of all is to take no risk at all! .

Analyze & T S 4. Strategic Ct M O O M N M I U 2. Assess/ E S V C S I Opportunities Risks O E N W S 7. A race In pursuit of performance Building Value AS/NZS ISO 31000. C 1. Identify Threats T N O I R C A A 3. Manage the Risk U Culture Communication L T Structure Direction Processes . ISO/IEC 31010 and ISO Guide 73 provide generic guidance on how to embrace the management of risk in order to maximise the opportunities and minimise the threats to the achievement of your objectives. Assess E S R E 5. The Journey Continues A journey ……….