The main aim of any risk management plan is to make an adverse event less likely to be fatal to your business and reduce the damage done by similar threats when they happen again. All organizations should use risk identification, assessment and management to capitalize on their strengths and evaluate weaknesses.
Similarly, quality management is a process that ensures your organization is consistently producing quality products or services that satisfy customers. The result is an organization-wide process that combines a quality system with risk analysis. Hence the process called, “Quality Risk Management.”
What Is Quality Risk Management?
Quality risk management is a system to identify, analyze, assess, treat, and review the risks relevant to an organization’s objectives. Risk assessment, risk analysis and risk control are necessary if an organization seeks continual improvement and maintains its quality among stakeholders.
Whatever model adopted for a quality risk management framework, a risk-based approach to quality management will look at relevant parts of your organization’s processes and how they correspond to specific risks.
Why is Quality Risk Management Important?
The purpose of quality risk management is to ensure that products and services meet customer expectations and make your organization more resilient. In addition to identifying harmful risks, an effective quality risk management strategy can involve the following:
- Proactive risk assessment, risk control, and quality management: An organization that keeps a risk-based approach in mind can be far more proactive in risk assessment or risk control, reducing costly or disruptive adverse events from causing too much damage and mitigating them so as to reduce disruption of regular operations.
- More efficient procedures: Building risk potentials into every aspect of the Quality Management System (QMS), even down to the procedure level ultimately saves time and resources because, over time, it tends to eliminate areas such as rework, scrap, corrective actions, etc. with an ever-improving approaches that anticipate problems before they occur.
- Better allocation of resources: Your organization will have better use of time and staff if employing a risk-based quality management system allows that resources be diverted to or from the largest or costliest risks at the right time and circumstances, rather than resulting in “emergencies” that are rarely dealt with effectively.
Why apply risk management to your quality management system (QMS)?
Previous iterations of risk management looked primarily at identifying risks only after they occurred, only then discovering the risk’s primary cause, correcting the mistakes, and preventing future errors.
As part of quality management systems today, risk management is focused on preventing risks and following a detailed framework for risk identification, risk analysis, and risk assessment. The resulting ‘risk treatment’ leads to a reduction in negative impacts from a disruptive event:
- ISO 31000 outlines the basic concepts and principles of risk management, defines procedures, and then outlines risk identification, analysis and assessment to improve risk management procedures. It covers principles of effective and efficient risk management, developing a risk treatment plan and understanding how organizational culture affects the design and implementation of risk management, and more.
- ISO 31000 is supported by IEC 31010: 2019, risk management – Risk assessment system, and ISO 31073, risk management. These two ISO standards contain helpful information and guidance for risk management systems and procedures, and specifications.
- Organizations should plan and assess how changes will impact on the organization whenever it decides to implement specific changes. The organization should also prepare for what it will do to alleviate or mitigate the risks with particular contingency plans.
- ISO 13485:2016 standards recommend a risk-based approach that observes the probability of certain risks and their severity.
- Additionally, ISO 9001:2015 includes the term ‘risk’ over 50 times.
The bottom line: Risk management is a necessary component in any quality management system.
What is Risk, Exactly?
Risk is the effect of uncertainties on your organization’s objectives. Deviating from any expectations for your organization’s priorities, especially not meeting your core objectives. For example, your organization could fail to meet service, safety, sales, performance, or operational goals.
In its broadest definition, risk is any effect from any cause that can lead your organization to deviate from expectations.
Additionally, organizations can have any level of objectives, including strategic, process, product, or service-oriented purposes, and they can perform a risk assessment for each one. These objectives can influence any or all parts of the organization. Furthermore, risks can be either positive or negative.
To illustrate, let’s say an organization has an end goal described by a series of time-based objectives, leading to a final goal. But before it can meet its second objective, the organization faces a forceful risk event that derails the end goal off schedule. As a result, the organization deviates from its planned objectives and fails to achieve the end goal. There are two distinctly different ways that this unplanned event can be viewed:
- An Adverse Risk is an uncertain event that led to the failure to achieve an objective.
- Conversely, a Positive Risk can help the organization accomplish its end goal more quickly because that uncertain event actually pushes the organization closer to the desired objective because alternatives had been planned ahead of time for that speciic (or a similar) potential.
So even if the organization encountered an adverse risk that interfered with its time-based objectives, dealing with unseen risk as a planned, positive occurrence can help the organization get back on track.
The goal of this type of proactive risk management is to ensure that positive and negative deviations are assessed and evaluated promptly so that your organization remains on track to achieve its goals. Quality risk management should view the threats an organization faces as opportunities such that achieving its objectives is accelerated or sustained in light of any unforeseen events.
Adopting Risk-Based Thinking
Risk-based thinking is the ability to use objective information to ascertain the probability of an uncertain event. As a result, you can assign risk to events. After a probability level is given to the risk, the organization can outline the consequences of any risk.
A risk-based approach to everyday operations will keep the consequences or results of risk at the forefront. It is a preventative way of thinking so that an organization can focus on foreseeing and stopping problems in advance.
If an organization seeks to adopt risk-based thinking, its members should adopt the framework of foreseeing positive and negative risks and evaluating their probabilities. An organization should adopt specific systems that keep risk assessment and risk analysis at the forefront.
Types of Quality Risk Management
This section delves into some of the dimensions of quality risk management and their purpose in illustrating the different sides to risk-based thinking:
- Enterprise risk management: This concept emphasizes a centralized, holistic view of risk management that stresses the significant risks to an organization’s highest objectives.
- Operational risk management: Operational risk management focuses on the risks to an organization at the operational level, such as employee conduct, business processes, data handling, and more.
- Strategic risk management: Strategic risk management looks at risks that affect an organization at the level of its strategies, such as business strategy, strategic objectives, or customer acquisition strategy.
Essential Risk Identification and Analysis Techniques
One step to begin handling essential risk identification is to use a risk analysis system in which an organization can reduce risks to acceptable levels. One way to perform this risk analysis is with a risk assessment matrix.
This risk analysis tool helps you evaluate a risk’s severity and probability. A popular tool is the risk matrix, which contains three levels for both severity and probability. Depending on how you go about labeling each level of a risk matrix, a standard method appears below:
To Identify Severity:
- Low: The risk can be successfully controlled or mitigated, or if it occurred, it would produce minor damage or a small impact.
- Medium: The risk can cause significant damage and may demand immediate correction.
- High: The risk can be highly disruptive, possibly dangerous, or disruptive to operations.
To Identify Probability:
- Unlikely: An unlikely but possible risk that can occur during regular business
- Likely: A likely risk that can occur during regular business
- Probable/Almost Certain: A very likely risk that can occur once or even often during regular business
As an organization conducts its risk identification and risk analysis, it will multiply the risk’s probability and severity to calculate an acceptable level of risk.
Other essential risk management tools to begin thinking about risk-based approaches involve the following:
- Risk identification: Find, identify, describe, and record the risks. Consider the risk’s source, the events leading up to it, its leading causes, and the potential consequences.
- Risk analysis: Comprehend the nature of the risk and place the risk among one of the above three severity levels.
- Risk evaluation: Compare the results of your risk review with your preferred criteria. Then decide how acceptable the risk is and what actions you can take to mitigate the risk in your process.
How to Create a Quality Risk Management Plan
Your risk-based quality management system should be systematic, with processes that will help improve your risk-based decision-making at the various levels of your organization. To begin and plan for a quality risk management process, you can consult the following checklist:
- Define the problems and risks in the levels of your organization, as well as outline the assumptions you have to identify a potential risk.
- Draw up background information or illustrate data on the specific threat or costs relevant to your risk assessment.
- Identify key staff, leaders, and resources needed to assess, monitor, and mitigate specific risks and ensure risk communication.
- Create a timeline for how your risk-based decision-making will proceed, including specific results or goals to be achieved.
Summing it All Up
By developing a methodical approach to risk management, our organizations will be better prepared for unusual events. Since we don’t have a crystal ball to see what’s headed our way, we can create and protect value in our organizations by managing risks, making decisions, setting and achieving objectives and improving performance.