The indeterminate economic times of the past few years have had a major effect on how organisation operate these days and now organisation have to take into account a renewed focus: to manage risk.
Risk is the main cause of uncertainty in any organisation.
The ability to manage risk will help organisation act more confidently on future business decisions.
In order to understand the importance of risk management, we need to examine organisational governance.
Organisational governance is normally viewed as a simple concept that is difficult to achieve in practice.
ISO 26000, defines organisational governance as “a system by which an organisation makes and implements decisions in pursuit of its objectives.” Governance systems include the management processes designed to deliver on performance objectives while considering stakeholder interests.
Governance, risk, and compliance are increasingly being treated as three parts of a single cohesive structure with the purpose of providing a whole view of organisational performance.
Business risks need to be identified, measured, mitigated, and controlled within the context of a management system. Compliance refers to the scope of regulations, legal requirements, industry standards, and business rules to which organisations must not only adhere and abide, but must demonstrate fulfilment.
Risk can come from both internal and external sources. The external risks are those that are not in direct control of the management. These include political issues, exchange rates, interest rates, and so on.
Internal risks, on the other hand, include non-compliance or information breaches, among several others.
These days, risk management has become essential for the senior management of many public sector entities, as well as local and international entities.
One of the most dominant perceptions about the public sector, in contrast with the private sector, is that it is fully supported by the government and is strictly controlled by laws and regulations. This leads many to conclude that the need for risk management in the public sector is unnecessary.
With this increasing focus on transparency in the public sector, and on the need to safeguard quality and efficient service delivery to the general public we see a steady and even natural transformation to a culture dedicated to strategic planning and continuous improvement. This shift to a strategic-planning focused on culture aims to improve work progress, and improve staff teamwork as one team with a reliable and effective vision.
