The Risk Management Process

This is defined in the AS/NZS Standard 4360:2004 as the systematic application of management policies, procedures and practices to the tasks of establishing the context, identifying, analysing, evaluating, treating, monitoring and reviewing risk.

It is a reiterative process of well-defined steps which, when taken in sequence, enables continual improvement in decision making by providing management with a greater insight into organisational risks and their impact.

Figure 1  Risk Management Process - Overview (text version)

Benefits of Risk Management

• provides a structured framework for more effective strategic planning to ensure maximising of opportunities and minimisation of losses
• widens management perspective and encourages initiative and pro-active behaviour
• contributes to improved organisational efficiency and effectiveness
• optimises the use of resources
• promotes greater openness in decision-making and improves communication
• provides senior management with a concise summary of the major risks affecting the organisation and a mechanism to ensure that appropriate resources are directed towards areas of high risk
• provides a framework for ensuring that unavoidable risks are adequately insured
• provides an effective and systematic approach which enables management to focus on areas of risk in their operations
• improves the level of accountability in the organisation