DEVELOPING A RISK MANAGEMENT FRAMEWORK

1.      We can see risk as a hole on the street. And risk management is a real second chance to avoid falling to that hole. In business, risk can lead us to the biggest failure and bankruptcy. So with a risk management whole of the team will optimize the design, implement, monitor, review and continue the whole of the project process or production process based on risk approach. We can avoid the risk and minimize the impact of the risk in our assets.

2.      Risk management process should be linked to the business process because all of the damage and failure from the output will give an impact on the business process. As we know that Risk Management Frameworks contains circle from Develop, Implement, Review and Enhance this is will have the step as :

a.     Approaching the project based on context and its culture;

b.     Identify the risk

c.      Doing risk assessment

d.     Choose the risk treatment

All of those steps will need management agreement, assets from the company, support from all of the company level and will give impacts to the whole of people’s inside the business process.

Risk management also has a huge relation with business planning because of this the process needs delivery on time and some strategies to reach the project target. So, risk management takes a big responsibility to maintain all of the process going well.

3.     If you ask what is the key questions need to be answered in developing risk management framework, first of the question is “how advanced should the risk management framework be?”. This question made for checking the aim of the company and the goals of the business process in a project or manufacture industry. We know that high risk, high return. The same case will happen in business, the complex risk management framework which covers all of the parties, needs a huge amount of resources and decrease the risk more. So we need to check the requirement or interests and needs of the owner. Second question, “how effective are current risk management practices?”. From this question, we will know how deep the team applied the risk management framework in their work. This question will help us to analyze the weak of the risk management practices in a company. After we found the lack and weakness of risk management practices, then we can ask “what is the most effective and efficient way for closing that gap?”. Surely, this question should be replied by us as risk management expertise. We can reply to this question by seeing the process, documentation and fast respond of the team to handle an issue.

4.     Documentation is an important part of risk management. Documentation in risk management can be used for :

a.     Demonstrating to stakeholders about the process

b.     Providing evidence of a systematic approach to risk identification and analysis

c.      Enabling decisions or processes to be reviewed

d.     Providing a record of risks and developing the organization’s knowledge database

e.     Providing decision-makers with a risk management plan for approval and subsequent implementation

f.      Providing an accountability mechanism and tool

g.     Facilitating on-going monitoring, review and continuous improvement

h.     Providing an audit trail

i.       Sharing and communicating information

5.     Key components of risk management strategy and policy document are:

Documentation started checking the plan, follow the policy and release the procedure. Risk management expert should do checking what’s the plan from stakeholders including purposes/objectives, responsibilities each stakeholder, government arrangements and existing procedures. After checking the plan, we need to know the scope of the risk management, arrange the strategy, resources, procedures, and connect it with timing activities and roadmap for enhancement of risk management practices. The output of the risk management plan is detailed roles and responsibilities; detailed description of process steps; risk rating scales; risk reporting templates; and risk management activities.

6.     Key factors to consider when developing a risk management governance structures are :

a.     Current organizational structure and authorities

b.     The current level of understanding, appreciation, and commitment to risk management by key individuals

c.      The current level of change readiness within the organization

d.     Key types of risks faced by the organization and functions currently managing the key risks

e.     The existence of logical “risk champions” within the organization

7.     In risk management, all stakeholders need to take responsibility for applied the risk management program. Board provides direction and oversight of risk management across the organization. CEO and secretary have several responsibilities for review and update strategic risk profile, monitoring, ensure the process follows the lower-level risk, and develop a strong risk management culture. Audit/Risk Committee needs to check the process risk management going well and checking the documents. Executive and management have responsibility for establishing policies and reviewing the effectiveness of the organization’s approach to risk management including the status of major business risks. For Chief Risk Officer/Risk Manager need to check the process is going well and based on a procedure that follows the lower-level risk. Chief Risk Officer also needs to develop, enhance and implement the risk management policies, procedures, and systems. Risk owners need to designing, implementing and monitoring risk treatments. The last stakeholders are staff and contractors. Staff and contractors need to identifying risks and reporting these to the relevant risk owners and they should also manage the risks.

8.     We can capture, analyze and communicate risk related the available information by using a quantitative and qualitative parameter, making ranking or prioritization for risks, facilitate trend analysis and divide risks based on the levels. Appeared risks can choose to accept or avoid. It depends on the business strategy and the goals of the company. Decision making of risks analysis result should follow the efficiency of costs, functionality, accessibility, and scalability.