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There are several organizations in the world that follow their very own risk management practices. However, there are some practices that are better than others. An international body has been formed to collate and codify such risk management practices. This international body is called the International Risk Governance Committee (IRGC).
The International Risk Governance Committee (IRGC) has extensively studied the risk management practices across various organizations. In the end, they have come up with a framework. In this article, we will have a closer look at what the International Risk Governance Committee (IRGC) framework is and how it helps in improving risk governance.
The International Risk Governance Committee (IRGC) framework is a framework that advocates the use of scientific methods in the field of risk governance and risk management. This framework is different from other approaches to risk management because it looks into the risk management problem from various points of view. As a result, people belonging to different functions within the organization as well as external stakeholders are more comfortable when the International Risk Governance Committee (IRGC) framework is used in order to manage risks.
The International Risk Governance Committee (IRGC) is made up of five different phases. The details of each of the phases have been mentioned below:
The defining feature of risk assessment is that here the problem is not considered only from the management’s point of view. Instead, users of this framework are encouraged to come up with different points of view which belong to the different stakeholders. This is what makes the International Risk Governance Committee (IRGC) framework pluralistic and multidisciplinary in nature.
The second phase comprises the appraisal process and is performed by people who are different from the ones performing step 4. In this step, the company performs a risk appraisal as well as a concern appraisal.
Risk appraisal means that the factual and measurable characteristics of the risk are measured and recorded. The distribution of these various measurements is also created in order to have a better understanding of the probable outcomes. On the other hand, a concern appraisal takes into account intangible and softer aspects like the opinion of various stakeholders about these risks.
The International Risk Governance Committee (IRGC) framework recommends a thorough investigation into the various consequences that the stakeholders associated with any risk. A thorough risk-benefit analysis must be done before taking any decision.
As a part of the concern appraisal, the risk must be viewed from a social, economic as well as legal point of view. Another important feature of the International Risk Governance Committee (IRGC) model is that it differentiates between the source of the risk and the impact made by it.
As a part of this step, the organization has to evaluate the risk and rate it as either acceptable, tolerable, or intolerable. Once again, this must not be done only from the point of view of the management. The point of view of various stakeholders must be taken into account before taking any decision.
There are various steps that need to be taken to manage risk. For instance, a wide variety of risk management options is generated. These options are then evaluated and chosen as per the benefits that they provide. Each option is viewed as a trade-off. The International Risk Governance Committee (IRGC) encourages thinking about how the risk management options will affect the various stakeholders.
The International Risk Governance Committee (IRGC) framework is so popular because it provides certain benefits. Some of these benefits are as follows:
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