What is Risk?
According to ISO 31000, risk is the “effect of uncertainty on objectives”, and an effect is a positive or negative deviation from what is expected. So, risk is the chance that there will be a positive or negative deviation from the objective we expect to achieve.
Risk combines the probability and potential severity of a potential event.
A high-risk event would have a high likelihood of occurring and a severe impact if it actually occurred.
The Risk Management Standard - ISO 31000
ISO 31000 is a generic risk management standard. It was developed by ISO Technical Committee 262, Risk Management. The official name of the standard is ISO 31000:2018 Risk management - Guidelines.
ISO 31000 defines a set of guidelines – not requirements. These suggestions or guidelines are stated in the following sections:
4. Risk Management Principles
5. Risk Management Framework
6. Risk Management Process
ISO 31000 2018 can be used by any organization no matter what size it is or scope. It can be applied to:
- any sector or industry
- any type of risk
- all kinds of activities
- a strategic level to help make decisions
- help manage and control processes, operations, functions, projects, programs, products, services, and assets.
Benefits of Risk Management
Risk management, when properly implemented and applied, will drive your organization to:
- Improve your risk identification and risk management controls.
- Improve the activities dedicated to loss prevention and incident management.
- Comply with legal and regulatory requirements.
- Improve the effectiveness of your governance activities.
- Improve the trust and confidence of your stakeholders.
- Enhance both mandatory and voluntary reporting.
- Comply with international norms and standards.
- Establish a basis for risk-based planning and decision making.
- Enable a proactive behavior towards risk management, unanticipated step-changes in organizational performance.
- Increases the likelihood of company objectives being met.
What is Asset Management?
Asset management is a set of coordinated activities, involving the balancing of costs, opportunities and risks against the desired performance of assets to achieve an organization’s objectives.
Asset management is the art and science of making the right decisions and optimizing the delivery of value. A common objective is to minimize the whole life cost of assets but there may be other critical factors such as risk or business continuity to be considered objectively in this decision making.
