5 steps to support risk management by leadership and commitment

Most of you will agree that without leadership and management commitment it is hard to get «value for money» from risk management activities. This statement applies to other management disciplines as well (quality management, healt and safety management etc.). But what does leadership and commitment mean in a practical world? Let's break it down a bit.

1 Integrate, adapt and customize

The purpose of risk management is to support the organization's achievement of objectives. This means that all risk management activities should be in correlation with the overall purpose of the organization. Strategies and organization culture should have great impact on how you choose to design your risk management system and how you decide to perform risk management activities. When risk management is customized to your goals and objectives you have taken a great step in ensuring that your risk management results are relevant to decision makers. And when decison makers find risk management results more relevant they will use them and request them again when new decisions are to be made.

2 Establish a clear understanding of why risk management is valuable to your organization

In organizations where management has made a clear statement, declaration or policy on why the organization aims to manage risk, it will be easier to decide the correct amount of resources to be used, and set aside time to assess and evaluate risk. A statement from management can act as both an encouragement and as communication of expectations. To get the proper effect, management needs to engage in active dialogue and communication regarding the content of the policy and the purpose of risk management.

3 Invest resources and award responsibility and authority

To enable your leaders and employees to commit to an activity they need to be allowed to do it with a reasonable amount of resources. Deciding approximately how much time and money should be spent on risk management will communicate the level of commitment the organization has to risk management. This does not mean that a low budget communicates low commitment and a high budget communicates high commitment. Rather it means that by enabling people to understand limits and expectations lay the ground for more empowered leaders and employees and support the integration of risk management across the organizations processes.

4 Define what risk means to your organization, how you will measure it and the level of risk you can tolerate

Again, when limits, boundaries, expectations and scope are clearly communicated in the organization it empowers your leaders and employees. Also, when management declares in detail what too much or too little risk is and how they want their organization to go about it, the rest of the organization will feel compelled to follow up.

5 Ensure continuous improvement of your risk management processes

Risk management is a continuous process that should change according to the organization's needs and objectives. Therefore, on a regular basis, taking the time to evaluate if the system and processes for risk management serves its purpose will be valuable. It is an investment in getting the most out of your risk management system and a signal to your leaders and employees that risk management is serious business.