The hierarchy of risk control is designed to help organisations prioritise risk control measures by focusing on the most effective ways to minimise risks. Organisations can follow the hierarchy of risk control for strategic risks to enable improved and informed decisions about managing risks and allocate resources appropriately to mitigate risks while pursuing strategic objectives.
The hierarchy of risk control provides a framework for evaluating different risk control options and selecting the most effective strategies based on the organisation’s risk appetite and overall objectives.
The use of the term hierarchy of risk control
The use of the term hierarchy of risk control is generally associated with workplace safety but can be an effective way to inform decision makers if a risk may increase in likelihood or consequence based on the effectiveness of the control. Skefto can support organisations both in managing their risks and safety hazards by providing software solutions that focus on the risk control hierarchy.
Effectiveness refers to the ability of risk management measures or controls to reduce the likelihood and/or consequences of identified risks. In other words, it is a measure of how well the implemented risk control measures are performing in managing risks.
The effectiveness of risk controls or the risk control hierarchy can be evaluated based on several factors, including:
- Risk reduction: The extent to which the implemented controls have reduced the likelihood and/or consequence of the identified risks. This can be measured through data analysis or other metrics.
- Cost-benefit analysis: The effectiveness of risk controls should also be evaluated in terms of the cost and benefits associated with implementing them. This includes the cost of implementing the controls and the potential cost savings from reducing the risk.
- Compliance: The extent to which the implemented controls are in compliance with applicable laws, regulations, and standards. This includes assessing whether the controls meet the required standards and regulations.
- Adaptability: The effectiveness of risk controls should be evaluated based on their ability to adapt to changes in the risk environment. This includes assessing whether the controls can respond to new risks or changes in existing risks.
The effectiveness of risk controls is critical in ensuring that organisations are able to manage risks and protect themselves from potential harm. Regular evaluation and improvement of the controls can help ensure that they continue to perform effectively over time. Skefto provides you with an easy to use, fully configurable solution to effectively manage risk.
Types of risk controls
There are several types of risk controls that organisations can implement to manage various types of risks. Here are some common types of risk controls:
- Preventive Controls: These controls are designed to prevent risks from occurring in the first place. Examples of preventive controls include training employees to follow safety procedures, conducting regular maintenance on equipment, and implementing cybersecurity measures to prevent data breaches.
- Detective Controls: These controls are designed to detect risks that have already occurred. Examples of detective controls include conducting regular audits to identify potential fraud or errors, monitoring network traffic for unusual activity, and implementing intrusion detection systems to identify unauthorised access attempts.
- Corrective Controls: These controls are designed to correct or mitigate the impact of risks that have been identified. Examples of corrective controls include performing backups of critical data, implementing disaster recovery procedures, activating business continuity plans or crisis management plans and repairing or replacing faulty equipment.
The type of risk controls implemented will depend on the specific risks that an organisation faces, as well as the resources available to manage those risks. Skefto makes it easy for you define your types of controls and assign these to multiple controls owners with workflows and automation’s.
Why should an organisation focus on risk controls?
An organisation should focus on risk controls because risks can have a significant impact on its operations, reputation, financial position, and the safety and well-being of the people, systems and places in its care. Here are just a few reasons why risk controls are important:
- Protects the organisation: Risk controls help protect the organisation from potential harm, including financial losses, legal liabilities, and reputational damage. By implementing effective risk controls, an organisation can reduce the likelihood and consequence of risks, helping to safeguard its resources and assets.
- Improves decision-making: Risk controls provide valuable information to decision-makers within the organisation, helping them to make informed decisions that consider the potential risks and benefits of various courses of action. This can lead to better business outcomes and greater efficiency in achieving organisational goals.
- Ensures compliance: Risk controls help organisations to comply with applicable laws, regulations, and industry standards. This is particularly important in industries that are heavily regulated, where non-compliance can result in significant fines, legal liabilities, and damage to the organisation’s reputation.
- Enhances stakeholder confidence: By implementing effective risk controls, an organisation can demonstrate to its stakeholders (e.g., customers, investors, employees) that it takes risk management seriously and is committed to protecting their interests. This can enhance stakeholder confidence in the organisation and help to build stronger relationships over time.
Organisation’s that focuses on risk controls can better manage risks, improve decision-making, comply with regulations, and enhance stakeholder confidence, leading to better business outcomes and greater long-term success. Skefto can help your organisation create and protect value by effectively managing risk and enhancing your organisational resilience.