What is the purpose of a risk management framework?

The purpose of a risk management framework is fundamentally to identify, assess, and manage risks across the organization. This framework serves as a structured approach that enables organizations to systematically understand and respond to risks that could potentially affect their objectives. It encompasses the processes and tools necessary to recognize risks, analyze their potential impact, prioritize them, and implement strategies to mitigate or manage these risks effectively.

By adopting a comprehensive framework, organizations can enhance decision-making processes and ensure that risk considerations are integrated into strategic planning and operations. This proactive approach aids in minimizing potential losses and leveraging opportunities, thereby contributing to the organization's overall resilience and sustainability.

In contrast to creating a checklist of best practices, which may not address all the unique risks an organization faces, or solely providing legal documentation for compliance—which is just one small facet of risk management—the framework's primary focus is on a holistic understanding and management of risks throughout the organization. While facilitating external audits is beneficial, it is not the principal aim of a risk management framework; rather, it is a byproduct of having robust risk management processes in place.