Risk Management
2.4 CornerstonesIf you don’t invest in risk management, it doesn’t matter what business you’re in, it’s a risky business
What is risk management?
Definition
A systematic and structured process of identifying, assessing, prioritising, and mitigating risks to achieve organisational objectives and minimise potential negative impacts.
Purpose
To contribute to the overall success and resilience of an organisation by effectively managing uncertainties.
We are equipped with a risk function
As humans, we continuously assess risks regardless of what we engage in. It is a survival function that allowed us and other animals to survive longer than the species that had an inferior risk assessment function.
Managing risks is an important way of navigating life but is mostly done unconscious. Effective risk management requires more than peaking around the corner, it requires continual and systematic work.
In the modern organisation context, it is however not enough that we all do our individual and mental risk assessments. The reason is that our individual risk assessments is based on our experience, genes, intellect, etc. Meaning that we all have different risk tolerance or appetite as well as different “measurement sticks” for risk.
We must therefore, as the CUBE® framework is based on, ensure that we have the mutual interpretation of risks and preventive actions. This is typically done by establishing the practice of risk management.
Risk management is about agreeing on the way to identify, assess, evaluate risks as well as how to act on them. In practice it is a systematic way of executing agreed upon ways of working using defined “measuring sticks” for risks.
The reason risk is an important practice to execute on all layers in the organisation is that it a way of protecting the organisation from preventable incidents that could have catastrophic impact on the organisation.
Some risks cannot be foreseen or prevented, but by systematically working with risk management, the organisation can reduce the overall threat and establish a resilient organisation that can thrive for a long time.
Next Step
Continue reading about the Outcome values…