What is risk management?

Summary

This video script explores the critical role of risk management in organizational governance, emphasizing its importance in strategic planning, decision-making, and achieving objectives. It highlights the necessity of balancing risk-taking with risk avoidance, and the iterative nature of managing risks through various tools and processes, ultimately aiming to foster a risk-aware culture within the organization.

Takeaways

• 😀 Risk is defined as the effect of uncertainty on objectives.
• 🏢 Risk management is a key component of an organization's governance framework.
• 💡 Managing risk helps in setting strategy, achieving objectives, and making informed decisions.
• 💰 Taking risks is fundamental to an organization's profitability and strategic delivery.
• 🚫 Avoidance of risk can be detrimental to an organization's future.
• 🔍 The board and management have a crucial role in overseeing risk management.
• 📝 The board should review and approve risk management policies and frameworks regularly.
• 🛠️ Management is responsible for developing and implementing the risk management framework and internal controls.
• 📈 A risk management framework should document risk tolerance and risk appetite.
• 🔎 Different types of risk include strategic, operational, emerging, people, and compliance risks.
• 🛑 Common tools for risk identification and management include risk management processes, policies, self-assessment, risk matrices, scenario planning, and loss event databases.

Q & A

What is the definition of risk?

Risk is defined as the effect of uncertainty on objectives.

Why is risk management important for an organization?

Risk management is crucial as it helps organizations set strategy, achieve objectives, and make informed decisions.

How does taking risks relate to an organization's profits and strategy?

Taking risks is fundamental to an organization making profits and a non-for-profit delivering on its strategy.

Why is risk avoidance potentially harmful to an organization?

Avoidance of risk poses a threat to the future of the organization, as doing nothing can be considered the greatest risk in a dynamic external environment.

What is the role of the board in risk management?

The board is responsible for overseeing risk management, reviewing and approving risk management policies and frameworks, and deciding on the nature and extent of risks the organization is prepared to take.

What is the responsibility of management in the context of risk management?

Management is responsible for developing and implementing the risk management framework and its internal controls.

What should a risk management framework document?

A risk management framework should document risk tolerance, risk appetite, and the levels of risk taking that are acceptable to achieve specific objectives.

What are the different types of risks mentioned in the script?

The script mentions strategic risk, operational risk, emerging and people risk, and compliance risk.

What tools are commonly used in the identification and management of risks?

Common tools include the risk management process, risk management policies and procedures, risk and control self-assessment, risk matrix, scenario planning, and loss event database.

How is the risk management process described in the script?

The risk management process is described as iterative, involving continuous monitoring, reviewing, and focusing on continuous improvement.

What is the vision of the Governance Institute as mentioned in the script?

The vision of the Governance Institute is to champion whole of organization governance and risk management through education, advocacy, and engagement with members and their broader community.