Objective of risk management
The first step to defining risk management goals and risk management objectives is to define the organization's shared vision. Once the shared vision is articulated, overall risk management goals and objectives must be defined.
While a vision statement is often aspirational, the goals and objectives should ordinarily describe in simple terms what is to be accomplished. They should be actionable by the organization. They should be defined in the context of the organization’s business strategy.
For example, some common risk management objectives chosen by companies to frame their risk management approach include the following:
- Develop a common understanding of risk across multiple functions and business units so as to manage risk cost-effectively on an enterprise wide basis.
- Achieve a better understanding of risk for competitive advantage.
- Build safeguards against earnings-related surprises.
- Build and improve capabilities to respond effectively to low probability, critical, catastrophic risks.
- Achieve cost savings through better management of internal resources.
- Allocate capital more efficiently.
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