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What is a risk management framework?

ISO 31000, the international standard for risk management, provides guidelines on managing risk faced by organizations. The standard doesn’t specify a rigid risk management framework, but it does offer a structured approach for managing risk effectively.

According to ISO 31000, the foundation of a risk management framework is 'Leadership and Commitment.' This is supported by the following key components:

  1. Integration: The framework should be integrated into the organization's overall governance, strategy, reporting, policies, values, and culture.

  2. Design: Designing the framework involves understanding the organization's internal and external context, defining risk management commitment and leadership, and allocating appropriate resources.

  3. Implementation: The framework is implemented by customizing the processes to the organization's external and internal context related to its objectives.

  4. Evaluation: Regularly evaluating the framework's effectiveness and improving it based on these evaluations.

  5. Improvement: Continuously improving the framework based on feedback and changes in external and internal contexts.

This approach emphasizes that risk management should be a part of all activities throughout the organization, including decision-making, and should be tailored to the organization’s needs and external environment.

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