Regulatory requirements in risk management |?IAPM

For a risk management system to be effective, it is not only important to know what risks exist, but also how an effective risk management system can be put in place to achieve the project’s objectives. There are standards such as ISO 31000 that describe cross-industry principles, frameworks and processes that can be used to guide risk management. The term GRC (Governance, Risk and Compliance) is also used in this context.? This article in our risk management series explains what GRC is and how risk management can be implemented.

GRC?—?Governance, Risk, Compliance

Effective and low-risk project management should encompass all three: Governance, Risk and Compliance.

“Governance” includes stakeholder relationships, contract management based on requirements, laws and standards, and the creation of qualitative and quantitative project objectives.? ?The key players in a project must take responsibility for ensuring transparency. This enables everyone in the project to understand how their own work relates to the work of others.

“Risk” involves the identification, analysis, evaluation, monitoring and control of risks.? ?Risks can be avoided, mitigated or transferred to minimise their impact and likelihood, or they can simply be accepted. As risks can change over the course of a project, this is an iterative process.

“Compliance” refers to adherence to internal and external requirements, including laws, regulations and standards. Procedures must be established to prevent legal sanctions and reputational damage, thereby enhancing the company’s credibility and operational standards.

These three areas are closely interlinked and together ensure the success of the project. While Risk (management) and Compliance help to minimise risk and comply with legal and internal regulations, Governance supports both aspects through effective management and decision-making. Well-implemented Governance ensures that requirements are managed in a structured way, Risks are identified early and Compliance measures are implemented consistently. Ensuring that all project managers adhere to these principles facilitates more informed decision making and reduces uncertainty. One standard that can help is ISO 31000.

ISO 31000

Having explained the importance of Governance, Risk and Compliance, we now examine the role of ISO 31000 in effective risk management. ISO 31000 provides a structured approach to risk management and defines principles, frameworks and processes that can be applied to any type of risk?—?regardless of industry, organisation size or project phase. The standard helps organisations systematically identify, assess and manage risks. It also provides guidance on how to conduct risk assessment procedures and how to implement measures to effectively achieve project objectives and minimise uncertainties.

Introduction of the risk management system

When implementing a risk management system, it is important to define its scope: What are the reasons for implementing it, which standards and norms need to be taken into account, and what are the requirements? Legal regulations such as the GDPR also play an important role in this context. In addition, all terms relevant to the process must be defined. The standard provides definitions for terms such as risk, stakeholder and probability. However, these should be supplemented with project-specific requirements. Later in the ISO, principles can be found that help to successfully integrate risk management into the project and support the handling of risks. These include:

1. Integration: Risk management needs to be embedded in all areas of the project. Project management should define clear responsibilities, formulate a comprehensive strategy and ensure that the risk management process is regularly reviewed and adapted.

2. Design: The development of risk management requires consideration of both internal and external influencing factors. These include legal requirements, economic conditions, corporate culture and available resources. A well-defined plan with clear objectives, assigned responsibilities and established communication channels is essential.

3. Implementation: Implementing risk management begins with the creation of an action plan. This should include specific risk mitigation measures, necessary resources and clear decision-making channels. All stakeholders need to be actively involved in the process and prepared for possible uncertainties.

4. Monitoring and evaluation: The success of risk management needs to be continually monitored. This includes regularly analysing the effectiveness of measures and identifying new risks. If necessary, adjustments should be made to optimise the process.

5. Continuous improvement: Effective risk management is a dynamic process that needs to be developed on a regular basis. Continuous monitoring allows weaknesses to be identified and improvements to be implemented. This ensures the long-term adaptability and effectiveness of the system.

Conclusion

Implementing effective risk management in accordance with ISO 31000 provides organisations with a structured and proven method for identifying, assessing and managing risks. By closely integrating risk with governance and compliance, uncertainty can be reduced, informed decisions can be made and legal requirements can be met.

Despite the benefits, the time and resources required should not be underestimated. Companies should carefully consider the extent to which a risk management system is implemented in order to achieve a reasonable balance between costs and benefits. In the long term, a well-designed integration will lead to a more stable and sustainable business.

Originally published at https://www.iapm.net.