Risk context

Posted by SkillMaker in Dec, 2013

What is the Risk context?


In order to develop a risk management strategy, an organisation must begin by establishing the risk context. The risk context should take into account both the internal and external set of circumstances or rules within which the organisation is operating. Creating a proper risk context can help an organisation to create an appropriate risk action plan. 

What is the Risk context like?

The risk context is like the background of a story. If you read a story without any real background information, you would fail to understand a lot of things about the characters in the story and the actions which they take as part of that story. If you consider risks to be like characters in the story and you do not look at the context of the risks, you may fail to understand some important things about the risks themselves. Setting the context will help you to see the whole picture.

What is the purpose of determining a Risk context?

It is important to determine the correct risk context, because it will help you to be able to identify the risks which are appropriate for this context. For example, a flower seller will have a completely different risk context to that which might apply to a lion tamer. If they both tried to use the same risk context, they may both land in trouble. Setting a risk context provides a brilliant basis on which to continue on with the rest of the risk management process.

What are the different types of Risk context?

Operational Context – This involves looking at the ways in which an organisation goes about its business. Most operational factors are internal factors, which are often changeable by the management structure.
Strategic Context – This involves looking at the environment (including legal frameworks) within which an organisation operates. Most strategic factors are external factors, which can easily change, but these changes are not usually controlled by the organisation itself.

What’s involved with determining a Risk context?

To determine a risk context, an organisation may have to look at its aims, structure, membership, client-base, activities and methods of operation. The context of each company could be different, even if it is in the same industry as other organisations, because many other factors and circumstances will be different. It is also important to look at the strategic context, because different regions or different industries have different external pressures which affect them.

Where does determining a Risk context fit into the risk management process?

Determining the risk context is the very first step in the risk management process. It must be done before an organisation begins to identify the risks which it faces. If risks were identified before a context was established then they might not be evaluated using the correct context, and therefore the action plan which is devised may not be suitable.

How does the Risk context impact on managing organisational risk?

Establishing context is a very important part of managing organisational risk, because it allows an organisation to consider each risk in its own unique circumstances. Establishing context also helps an organisation to decide on an action plan of how best to address the risks.

What terms are used in Risk context?

Risk – Something which may happen to an organisation.
Context – The circumstances which surround an organisation.
Internal – Parts of the context which comes from within the organization itself, such as the company’s aims and objectives.
External – Factors from outside of the company which may provide part of the context.

Where can I find more information about Risk context?

http://www.ourcommunity.com.au/insurance/view_help_sheet.do?articleid=339
http://www.isaca.org/Groups/Professional-English/po9-2-establishment-of-risk-context/Pages/Overview.aspx

Related Posts:

Readers who viewed this page, also viewed: