The primary purpose of the management of risk is to identify potential threats to the achievement of objectives before they manifest in order that effective mitigation strategies may be established thorough the implementation of controls and contingency plans. Effective management of risk includes early, as well as robust risk identification, which cannot occur without upfront clear objective setting. This is the reason why it is crucial that the necessary collaboration and involvement of relevant stakeholders takes place upfront in all strategic as well as operational planning.
Institutional objectives are short-term, medium-term, and long term goals that an organisation seeks to achieve. There are 3 main aspects of objective setting that must be well noted:
- It plays an important role in the formulation of policies. Policies serve as the backbone of the objectives; they sustain them, creating a uniformed interpretation and application of them across an organisation. They help set guidelines that inform;
- The determination and allocation of resources. It is crucial for this to take place, it enables the identification of the aspects of an operation that require more focus/attention and therefore prioritisation. This facilitates cost-saving and maximization of efficiencies; for
- The achievement of objectives that aids an organisation to reach its strategic goals, through the creation of specific and measurable milestones.
The management of risk is a forward-looking process that is a critical part of the strategic as well operational planning of an organisation. Timely detection of possible threats is an important component of cost management, as well as reputation management, to name but a few.
One of the purposes of managing risk is to create and protect stakeholder value and to do this effectively, sound, well-informed decisions need to be adopted. Therefore, an organisation needs to clearly understand the objectives it seeks to achieve and the possible inhibitors to these. If it does not, decisions may be inconsistent and lead to miscalculations.
It is important to emphasise that management of risk is definitely not:
- Intended to be all-encompassing or limit thinking in terms of managing risk.
- Aimed at complicating or burdening risk management processes.
- A tick-in-the-box exercise (rather an intervention aimed at triggering thought).
- Cast in stone – it is open to additional input and enhancement.
- Does not represent the destination, it is only part of the journey and dynamic in nature.
