ISO 31000:2018 Clause 6.3 Scope, context and criteria

ISO 31000:2018 9 Minutes

6.3.1 General

The purpose of establishing the scope, the context and criteria is to customize the risk management process, enabling effective risk assessment and appropriate risk treatment. Scope, context and criteria involve defining the scope of the process, and understanding the external and internal context.

ISO 31000:2018, in Clause 6.3, focuses on the aspects of scope, context, and criteria within the risk management process. Here’s a brief overview of each element:

1. Scope :

  • Definition: The scope of risk management defines the boundaries and extent of the risk management process within an organization. It outlines what is included and what is excluded from the risk management activities.
  • Considerations:
    • Internal and External Context: The scope considers both internal and external factors that may impact the organization’s risk landscape.
    • Objectives and Activities: It aligns with the organization’s objectives and encompasses relevant activities.
  • Key Elements:
    • Identification of Boundaries: Clearly defining the organizational units, processes, projects, or other elements covered by the risk management process.
    • Exclusion Criteria: Specifying areas or aspects that are intentionally excluded from the risk management scope.

2. Context:

  • Definition: Context refers to the internal and external circumstances that influence the design and implementation of the risk management process. It provides the backdrop against which risks are identified, assessed, and managed.
  • Considerations:
    • Internal Context: Organizational culture, structure, policies, and processes.
    • External Context: Economic, political, legal, technological, social, and environmental factors.
  • Key Elements:
    • Understanding Influencing Factors: Identifying and understanding the factors that shape the risk environment.
    • Influence on Objectives: Assessing how the context influences the achievement of organizational objectives.
    • Relevance of Information: Determining the relevance and reliability of information in the given context.

3. Criteria:

  • Definition: Criteria are the standards, benchmarks, or reference points used to evaluate risks. They provide a basis for decision-making within the risk management process.
  • Considerations:
    • Risk Criteria: Factors used to evaluate the significance of risks, including impact, likelihood, and other relevant factors.
    • Performance Criteria: Standards used to assess the effectiveness of risk management processes and controls.
  • Key Elements:
    • Establishing Criteria: Defining clear and measurable criteria for assessing risks and performance.
    • Alignment with Objectives: Ensuring that criteria align with the organization’s objectives and values.
    • Consistency: Maintaining consistency in the application of criteria across different areas of the organization.

Integration of Scope, Context, and Criteria:

  • The organization needs to integrate the considerations of scope, context, and criteria to establish a comprehensive and effective risk management framework.
  • A clear understanding of scope helps in delineating the boundaries of risk management activities.
  • The context provides the backdrop against which risks are assessed, ensuring that the evaluation is relevant to the organization’s specific circumstances.
  • Criteria guide decision-making by providing a consistent and objective basis for evaluating risks and performance.

These elements collectively contribute to the establishment of a risk management process that is tailored to the organization’s needs, responsive to its environment, and aligned with its objectives. Organizations are encouraged to regularly review and, if necessary, update the scope, context, and criteria to ensure ongoing relevance and effectiveness in managing risks.

The purpose of establishing the scope, the context and criteria is to customize the risk management process, enabling effective risk assessment and appropriate risk treatment.

The purpose of establishing the scope, context, and criteria in the risk management process is to tailor the approach to the specific needs and circumstances of the organization. This customization, in turn, enables more effective risk assessment and appropriate risk treatment, aligning the risk management efforts with organizational objectives and promoting resilience in the face of uncertainties.Let’s delve a bit deeper into how each element contributes to customizing the risk management process and facilitating effective risk assessment and treatment:

1. Scope:

  • Purpose: Defines the boundaries and extent of risk management activities within the organization.
  • Customization: Tailors the risk management process to the specific organizational units, projects, or processes included within the defined scope.
  • Effectiveness: Ensures that the risk management efforts are focused on areas that are relevant to the organization’s objectives, eliminating unnecessary efforts in unrelated areas.

2. Context:

  • Purpose: Provides an understanding of internal and external factors influencing the risk environment.
  • Customization: Adapts risk management strategies to the unique circumstances and challenges faced by the organization.
  • Effectiveness: Enables a more nuanced and context-specific approach to risk identification, assessment, and response.

3. Criteria:

  • Purpose: Provides standards and benchmarks for evaluating risks and performance.
  • Customization: Defines specific criteria based on the organization’s objectives, values, and risk appetite.
  • Effectiveness: Facilitates consistent and objective decision-making by establishing a clear basis for evaluating the significance of risks and the effectiveness of risk management measures.

Integration for Effective Risk Assessment and Treatment:

  • Customization: The combination of a well-defined scope, an understanding of the organizational context, and clear criteria allows for the customization of the risk management process. Customization ensures that risk assessments are tailored to the specific characteristics and priorities of the organization.
  • Efficiency: By customizing the risk management process, organizations can avoid a one-size-fits-all approach and focus resources on the areas that matter most. This enhances the efficiency of risk assessment and treatment efforts, allowing for targeted interventions where they are needed.
  • Relevance: A customized risk management process, informed by the organization’s context and criteria, ensures that the identified risks are relevant to the specific goals and circumstances of the organization. Relevance is crucial for engaging stakeholders and fostering a risk-aware culture.
  • Alignment with Objectives: The alignment of scope, context, and criteria with organizational objectives ensures that the risk management process is directly contributing to the achievement of strategic goals. This alignment enhances the overall effectiveness of risk assessment and treatment measures.
  • Continuous Improvement: Regularly reviewing and updating the scope, context, and criteria enables organizations to adapt to changes in their environment, ensuring ongoing relevance and effectiveness. This supports a culture of continuous improvement in risk management practices.

Scope, context and criteria involve defining the scope of the process, and understanding the external and internal context.

Defining the scope of the process and understanding the external and internal context are essential steps in the risk management journey. Criteria provide the yardstick for evaluating risks within this defined scope and context, collectively contributing to a robust and adaptable risk management framework.Let’s delve a bit deeper into each element:

1. Scope:

  • Defining the Scope: Establishing the boundaries and extent of the risk management process within the organization. Identifying the organizational units, processes, projects, or activities that are included in the risk management efforts.
  • Customization: Tailoring the risk management process to the specific needs, objectives, and priorities of the organization. Ensuring that resources are directed to areas where risks are most relevant and impactful.

2. Context:

  • Understanding External and Internal Context: Assessing the external factors (economic, political, legal, technological, social, and environmental) that may impact the organization. Considering internal factors such as the organizational culture, structure, policies, and processes.
  • Customization: Adapting risk management strategies to the unique circumstances and challenges posed by the external and internal context. Recognizing that the risk landscape is dynamic, and understanding the context helps in anticipating changes.

3. Criteria:

  • Defining Criteria: Establishing standards, benchmarks, or reference points used to evaluate risks and performance. Identifying the factors that will be considered when assessing the significance of risks, such as impact, likelihood, and other relevant criteria.
  • Customization: Tailoring criteria based on the organization’s objectives, values, and risk appetite. Ensuring that criteria are aligned with the specific goals and priorities of the organization.

Integration for Effective Risk Management:

  • Holistic Approach: Integrating scope, context, and criteria ensures a holistic approach to risk management. The process considers not only the specific areas covered but also the broader internal and external influences and the standards by which risks are assessed.
  • Adaptability: Recognizing that the risk environment is subject to change, the organization can adapt its risk management processes based on an understanding of scope and context. Criteria provide a structured basis for assessing risks in a consistent manner, ensuring adaptability while maintaining objectivity.
  • Alignment with Objectives: The integration of scope, context, and criteria ensures that risk management efforts are directly aligned with the organization’s objectives. The risk management process becomes a strategic tool for achieving organizational goals rather than a standalone activity.
  • Efficiency: By clearly defining the scope and understanding the context, resources can be efficiently directed toward the most critical areas. Criteria help in prioritizing risks, focusing efforts on those that have the most significant impact on organizational objectives.
  • Continuous Improvement: Regularly reviewing and updating the scope, context, and criteria allows the organization to adapt to changes in the risk landscape. Continuous improvement is facilitated by an ongoing understanding of the evolving internal and external context.

Establishing the scope, context, and criteria for risk management

Establishing the scope, context, and criteria for risk management is a crucial step in developing a comprehensive and effective risk management framework. Here’s a guide on how to go about it:

1. Establishing the Scope:

  • Identify Organizational Units and Processes: Determine which organizational units, departments, projects, or processes will be included in the risk management efforts.
  • Define Boundaries: Clearly articulate the boundaries of the risk management process to ensure clarity on what is included and excluded.
  • Consider Objectives: Align the scope with the overall objectives of the organization, ensuring that risk management efforts contribute to strategic goals.
  • Engage Stakeholders: Consult with key stakeholders to ensure their input in defining the scope, considering their expertise and insights.

2. Understanding the Context:

  • Internal Context: Assess the internal factors that may influence the risk landscape, including organizational culture, structure, policies, and processes. Identify the capabilities and resources available for risk management within the organization.
  • External Context: Analyze external factors such as economic conditions, political climate, legal requirements, technological advancements, social trends, and environmental considerations. Stay informed about changes in the external environment that may impact the organization.
  • Engage Stakeholders: Consult with internal and external stakeholders to gather diverse perspectives and insights on the context.

3. Defining Criteria:

  • Risk Criteria: Identify the factors that will be considered when assessing risks, such as impact, likelihood, and other relevant dimensions. Define risk tolerance levels, specifying the acceptable level of risk for different types of activities or objectives.
  • Performance Criteria: Establish criteria for evaluating the effectiveness of risk management processes and controls. Consider key performance indicators (KPIs) that reflect the success of risk management efforts.
  • Alignment with Objectives: Ensure that criteria align with the overall objectives and values of the organization. Link risk criteria directly to strategic goals to demonstrate the relevance of risk management to organizational success.

4. Integration:

  • Holistic Approach: Integrate the scope, context, and criteria into a holistic risk management framework. Ensure that these elements collectively provide a comprehensive understanding of the risk landscape.
  • Adaptability: Recognize that the risk environment is dynamic, and the established scope, context, and criteria should be adaptable to changes. Establish mechanisms for regular review and updates based on evolving circumstances.

5. Documentation:

  • Create Formal Documentation: Document the established scope, context, and criteria in a formal document, such as a risk management policy or framework. Clearly communicate these aspects to relevant stakeholders to ensure a shared understanding.

6. Review and Continuous Improvement:

  • Regularly Review: Periodically review the established scope, context, and criteria to ensure ongoing relevance. Consider conducting formal reviews at scheduled intervals or in response to significant changes in the organizational environment.
  • Continuous Improvement: Use feedback from stakeholders, lessons learned, and emerging risks to continuously improve the risk management framework. Encourage a culture of continuous improvement in risk management practices.

By following these steps, organizations can establish a robust foundation for their risk management process, ensuring that it is tailored to the specific needs and objectives of the organization and is well-aligned with its internal and external context.

Documents and records required

  1. Documented Information Establishing the Context:
    • Organizational Context Document:
      • Purpose: Describes the internal and external factors that may impact the achievement of objectives.
      • Content: Includes an analysis of the organization’s external environment, stakeholders, and internal capabilities.
  2. Documented Information Defining the Scope:
    • Scope Definition Document:
      • Purpose: Clearly outlines the boundaries and components included in the scope of risk management.
      • Content: Describes the projects, processes, and activities covered by the risk management efforts.
  3. Documented Information Setting Criteria:
    • Risk Criteria Document:
      • Purpose: Establishes the criteria against which risks will be evaluated.
      • Content: Includes criteria for assessing risk likelihood, impact, and criteria for risk acceptance or tolerance.
  4. Records of Stakeholder Communication:
    • Stakeholder Communication Records:
      • Purpose: Documents communication with internal and external stakeholders regarding the establishment of the context, scope, and criteria.
      • Content: Includes meeting minutes, emails, or other records of communication.
  5. Records of Scope Reviews and Updates:
    • Scope Review Reports:
      • Purpose: Documents periodic reviews of the defined scope.
      • Content: Outlines any updates or changes made to the scope based on the review findings.
  6. Records of Contextual Analysis:
    • Context Analysis Reports:
      • Purpose: Provides a record of the analysis of internal and external factors influencing the risk landscape.
      • Content: Includes findings related to economic conditions, regulatory changes, and other relevant factors.
  7. Records of Criteria Evaluation:
    • Criteria Evaluation Records:
      • Purpose: Documents the evaluation of risk criteria and their effectiveness.
      • Content: Records of assessments, findings, and any adjustments made to the criteria.
  8. Records of Contextual Changes:
    • Change Logs:
      • Purpose: Documents any changes in the organizational context that may impact risk management.
      • Content: A log of changes, reasons for changes, and their implications.
  9. Records of Scope Communication:
    • Scope Communication Records:
      • Purpose: Documents the communication of the defined scope to relevant stakeholders.
      • Content: Includes records of training sessions, awareness campaigns, and any formal notifications regarding changes to the risk management scope.
  10. Records of Stakeholder Feedback:
    • Feedback Reports:
      • Purpose: Documents feedback received from stakeholders on the established context, scope, and criteria.
      • Content: Summarizes feedback, identifies areas for improvement, and records actions taken in response.
  11. Records of Legal and Regulatory Compliance:
    • Compliance Records:
      • Purpose: Demonstrates adherence to legal and regulatory requirements related to risk management.
      • Content: Records of compliance assessments, legal reviews, and any actions taken to address compliance issues.
  12. Records of Continuous Improvement:
    • Improvement Logs:
      • Purpose: Documents adaptations or improvements made to the context, scope, or criteria based on feedback and lessons learned.
      • Content: Records of changes, reasons for changes, and their impact on the risk management process.

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Pretesh Biswas has wealth of qualifications and experience in providing results-oriented solutions for your system development, training or auditing needs. He has helped dozens of organizations in implementing effective management systems to a number of standards. He provide a unique blend of specialized knowledge, experience, tools and interactive skills to help you develop systems that not only get certified, but also contribute to the bottom line. He has taught literally hundreds of students over the past 5 years. He has experience in training at hundreds of organizations in several industry sectors. His training is unique in that which can be customized as to your management system and activities and deliver them at your facility. This greatly accelerates the learning curve and application of the knowledge acquired. He is now ex-Certification body lead auditor now working as consultancy auditor. He has performed hundreds of audits in several industry sectors. As consultancy auditor, he not just report findings, but provide value-added service in recommending appropriate solutions. Experience Consultancy: He has helped over 100 clients in a wide variety of industries achieve ISO 9001,14001,27001,20000, OHSAS 18001 and TS 16949 certification. Industries include automotive, metal stamping and screw machine, fabrication, machining, assembly, Forging electrostatic and chrome plating, heat-treating, coatings, glass, plastic and rubber products, electrical and electronic equipment, assemblies & components, batteries, computer hardware and software, printing, placement and Security help, warehousing and distribution, repair facilities, consumer credit counseling agencies, banks, call centers, etc. Training: He has delivered public and on-site quality management training to over 1000 students. Courses include ISO/TS -RAB approved Lead Auditor, Internal Auditing, Implementation, Documentation, as well as customized ISO/TS courses, PPAP, FMEA, APQP and Control Plans. Auditing: He has conducted over 100 third party registration and surveillance audits and dozens of gap, internal and pre-assessment audits to ISO/QS/TS Standards, in the manufacturing and service sectors. Other services: He has provided business planning, restructuring, asset management, systems and process streamlining services to a variety of manufacturing and service clients such as printing, plastics, automotive, transportation and custom brokerage, warehousing and distribution, electrical and electronics, trading, equipment leasing, etc. Education & professional certification: Pretesh Biswas has held IRCA certified Lead Auditor for ISO 9001,14001 and 27001. He holds a Bachelor of Engineering degree in Mechanical Engineering and is a MBA in Systems and Marketing. Prior to becoming a business consultant 6 years ago, he has worked in several portfolios such as Marketing, operations, production, Quality and customer care. He is also certified in Six Sigma Black belt .

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