1. Risk Identification:
- Identify and recognize potential risks that could affect the organization's objectives, operations, and reputation. This involves conducting a comprehensive risk assessment across different areas, including financial, operational, compliance, and reputational risks.
2. Risk Assessment:
- Evaluate and assess the identified risks based on their potential impact and likelihood of occurrence. This involves assigning risk scores or levels to prioritize risks based on their severity.
3. Risk Control and Mitigation:
- Develop and implement strategies to control and mitigate identified risks. This may include adopting internal policies, procedures, and controls to minimize risk exposure and reduce the probability of risks materializing.
4. Risk Financing:
- Determine how to finance potential losses or damages that may arise from risks. This can include obtaining insurance coverage, establishing risk reserves, or using other financial instruments to transfer or share risks.
5. Risk Monitoring and Reporting:
- Continuously monitor and track risks to ensure that they remain within acceptable levels. Regularly report on risk management activities and performance to stakeholders, such as management, board of directors, and regulatory authorities.
6. Risk Governance:
- Implement appropriate governance structures and processes for effective risk management. This includes establishing a risk committee or oversight body, defining roles and responsibilities, and ensuring compliance with relevant regulations and standards.
7. Risk Culture:
- Foster a risk-aware culture within the organization. Encourage a proactive approach to risk management and ensure that employees at all levels understand and contribute to risk identification and mitigation efforts.
8. Continuous Improvement:
- Regularly review and update the Composite Risk Management framework based on lessons learned, changes in the risk environment, and regulatory requirements. Continuously improve risk management processes and practices to enhance overall risk management effectiveness.
It's important to note that Composite Risk Management is an ongoing process that requires collaboration and coordination across different departments and functions within an organization. Effective risk management enables organizations to respond proactively to potential threats, minimize losses, and make informed decisions to achieve their objectives while preserving long-term sustainability.