Risk Management Building Blocks

Known globally as The Risk Doctor, David has been working in risk management for about 30 years. He has worked in 48 countries on every continent except the Antarctic (too cold!), with clients in most industries.

  Risk Management   ProjectsAtWork  

There are four characteristics that every organization must possess to make enterprise risk management work. Some of these prerequisites will take more time to develop than others, but that shouldn’t keep you from getting started with a pilot effort that can show the way.

The term Enterprise Risk Management (ERM) describes a comprehensive and integrated framework for managing risk at all levels within an organization. There are four organizational characteristics are required if ERM is to work properly:

1. Defined objectives at all levels. Risk is defined in terms of objectives — without clearly defined objectives it is not possible to identify or manage risk. Objectives exist at various levels in an organization, forming a hierarchical structure. ERM requires these objectives to be clear (everyone knows and agrees what they are), aligned (all objectives contribute to the overall goal) and coherent (fitting together as a set, both top-down and bottom-up).

2. Matching organization to objectives. Effective organizations have structures that mirror the hierarchy of objectives, with clear mapping between levels. Senior management are responsible for achieving strategic objectives, and front-line staff (project teams, operational groups, supply chain partners etc.) must meet operational and delivery objectives. The levels in between are covered by middle management…

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