In the absence of such codification, different stakeholders in the risk management policy will have different interpretations of success. Since the whole process is about dealing with imperfection, it is important to define what success means and codify it in the risk management policy.

This means that it is not possible to completely eliminate risk. In the previous articles, we have repeatedly mentioned that risk management is not a perfect activity. The valuation methods used for tracking, measuring, and subsequent reporting of risks should be the same to ensure that the results are comparable across the years. Hence, just like accounting policy decisions, changes in the decisions regarding measurement and valuation of receipt need to be vetted carefully. It is likely that the management will change the methods repeatedly based on what suits their decisions. Hence, if there is no consensus about the mechanisms which have to be used in order to value risk and control it, there will be chaos. These different methods are likely to give different results. This means that there are several different ways that can be used to measure risks. The operational and regulatory framework needs to be thoroughly studied before reaching any final conclusions. It is the job of the organization to do a thorough scan of the various risks that an organization faces during this time.

The risk appetite of all stakeholders needs to be matched with the probable outcomes of different risk levels. This framework has to be developed after due consultation by all stakeholders. The primary purpose of a risk policy is to ensure that the organization has a commonly agreed-upon risk management framework in place. This article explains what a risk management policy is as well as the different steps that need to be taken to draw up a risk management policy. Since an organization is made up of several stakeholders, it is important for all those stakeholders to get aligned on the same path so that the risk management policy can be drawn up.

It can be considered to be like a constitution since all decisions related to the risk management practices in any company emanate from this document. This is a basic document, which is drawn up when the risk management policy of a company is being put into place. Just like the vision and mission of any company, its risk management policy is also unique. Practices that may be considered acceptable in one organization may not be considered acceptable in another organization. The policy of risk management is unique to every organization.

Risk management policy