Risk Management Is About Making Decisions
According to Norman Marks, an authority on corporate governance, risk management and internal audit, how a company makes decisions is at the heart of effective risk management. Whether an organization is large or small, whether decisions are made by a board of directors, a small group of officers or managers, or one owner with outside advisers, the quality of decision making can determine success or failure.
In a recent post (https://normanmarks.wordpress.com/2019/07/17/how-to-assess-the-effectiveness-of-risk-management) Marks lists his four top questions on how management and directors make decisions about risk.
- Do decision makers believe there are reliable processes to support decision making – current, reasonably complete and reliable information about the options they are considering?
- Do decisions involve the disciplined weighing of risks and benefits of each option?
- Does the decision process help set and execute strategy?
- Do the organization’s processes and practices provide reasonable assurance of success?
Carol Williams builds on Marks’ questions. In her post https://www.erminsightsbycarol.com/gauging-risk-performance-management/ she offers three additional questions:
- How involved is management in defining behavior in the organization?
- Has management reached an agreement on how much risk to take, and does the board agree with it?
- What methods does the organization use to understand risk before making decisions?
When developing specific questions for your organization, Williams recommends deliberately choosing each word in a question. Preferably questions should be as open ended as possible.
Use these questions in your decision making process.