The Standards for risk management have been established by the Institute of Risk Management (IRM), theNational Forum for Risk Management (ALARM) and the Association of Insurance and Risk Managers (AIRMIC). They have coordinated as a team to provide banks and other financial institutions with a standard to ensure best practices and discipline.
The standards set by these organizations are aimed at ensuring best practices in:
Standard for Terminology: The choice of words used in organizations involved in risk management must be ideal. The language used in documentation and business procedures must be clear and transparent. Professional and financial terminology must be used in the right manner.
Structure of the Organization: Risk management standards establish a standard structure for organizations with risk management as a best practice.
Standards for Risk Management Process: Organizations with risk management must follow standard procedures set by these organizations. This is meant to make the whole process efficient and productive at every department and level.
Defining Objectives: These standards have defined the objective for risk management to enable organizations to fix a target.
Therefore, by implementing the standards established, organizations will succeed in ensuring compliance. These risk management standards are in accordance with the requirements stipulated by the International Organization for Standardization (ISO). In its recent document the ISO/IEC Guide 73 Risk Management, there are best practices which have been fixed as standards.
According to the requirements of the ISO, risk management standards must ensure compliance with a standard framework. This standard framework comprises of the following processes:
The standards for risk management have been established to be concise and effective in any financial setup. However, risk management standards vary in different organizations. Therefore, they will be needed to make necessary adjustments.
In this section we will discuss: