What Is A Risk Management Framework And Why It Is Essential For Your Organization’s Future

by | Apr 5, 2018 | Blog, Risk Management |

A Risk Management Framework empowers an organization to develop a comprehensive and realistic risk appetite. To do this, they must align with the corporate governance, organizational values and the rules and regulations that surround the organization.

Risk is omnipresent in organizations. As a ubiquitous component of operations, risk cannot be avoided. However, it can be managed.

The management of risk is a comprehensive process that requires time, collaboration and resources. While risk often carries negative connotations, It is imperative that risks can also be identified as opportunities for an organization.

To understand why a Risk Management Framework is essential for your organization’s future, a more comprehensive understanding of what one is must be established.

What is a Risk Management Framework

A Risk Management Framework, at its simplest, is how an organization plans to manage all internal and external risks that affect them or could affect them. Basically, what it provides is actionable guidelines for an organization that help it to achieve their organizational objectives.

Understanding these functions and the various ways they impact organizational goals allows you to navigate your organization through risks. Your Risk Management Plan should also provide you with a comprehensive understanding of where your organization stands.

What Should An Effective Risk Management Plan Be Able To Do?

For a risk management plan to be effective, it must be aligned with your organization’s business objectives. It should also be able to:

  1. Identify potential risks on a scale of severity.
  2. Allow for disaster rehearsal and pre-testing.
  3. Identify all relevant stakeholders impacted and/or required to address the risk.
  4. Ensure the resources required to navigate the risk are accessible.
  5. Allow for post-risk assessment and evaluation.
  6. Be constantly updated.
  7. Be understood by all internal stakeholders.


If you understand your position, and you know where you want to go, you can be empowered to understand what you need to do to get there. Therefore, it is imperative that your organization goals, strategies, vision and mission statement align with how your organization manages risk. A good way to make sure of this is to keep these in mind when developing your Risk Management Plan.

Why is an Effective Risk Management Framework Essential For Your Organization?

An effective risk management framework details all external and internal functions and all stakeholders that affect an organization. These include:

  1. Stakeholders: shareholders, regulators, employees, partners, board members, competitors, etc.
  2. Operations
  3. Workflow
  4. Governance
  5. Compliance
  6. Law
  7. Corporate Values
  8. Business Objectives
  9. Organizational structure/hierarchy
  10. Internal and external communication processes
  11. Global Risks

Risks can turn into crises when an organization’s operations are not aligned under a single Risk Management Framework that is understood by all stakeholders. Therefore, it is essential that your organizational culture aligns with your Risk Management Framework. This means having a Risk Management Framework that is comprehensive.

Delegating accountability and responsibility at appropriate levels throughout your organization, communicating the benefits of risk management to stakeholders, and ensuring the framework remains appropriate helps your employees to stay committed to your Risk Management Framework. Collaborative commitment is essential for ensuring that it is actionable and therefore effective.

Making Sure Your Stakeholders Are Committed To Your Risk Management

Navigating an enterprise in the digital era means risk-taking. A Risk Management Framework that all stakeholders are committed to allow an organization to understand its risk appetite at all levels. Empowering all stakeholders also means solutions are collaborative, leading to more efficient recovery. Once fully integrated into your organization, an effective Risk Management Framework can also encourage innovation by embracing productive self-disruption.

The success of your risk management processes will depend on the effectiveness of the management framework providing the foundations and arrangements that will embed it throughout the organization at all levels.

Risk management should be embedded in all your organization’s practices and processes in a way that is relevant, effective and efficient. The risk management process should be ingrained in all organizational processes. This means that your risk management framework should be able to be integrated into the policy development, daily business operations, strategic planning and change management processes of your organization.

It is imperative that your organization’s risk framework encourages collaboration. The management of risks often requires multi-stakeholder solutions at varying levels within an organization.

Understanding the importance of a Risk Management Framework that is designed to be integrated into your organization’s operations is essential in the digital era. The pioneering and most innovative organization’s of today understand risk and how to manage it.

The decision is yours. Take the time to create a comprehensive and effective Risk Management Plan and become a pioneer in your industry, or continue to be second-best.

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