What is the purpose of a 'risk framework'?

The purpose of a 'risk framework' is primarily to guide risk identification and management. A risk framework provides a structured approach for organizations to identify, assess, prioritize, and manage risks in a systematic manner. This structure helps to promote consistency and clarity in how risks are evaluated and addressed across the organization, ensuring that all relevant risks are considered and managed appropriately.

Establishing a risk framework enables organizations to make informed decisions about how to respond to various risks, thus enhancing their ability to protect assets, ensure operational efficiency, and achieve strategic objectives. By facilitating a proactive approach to risk management, the framework supports better planning and resource allocation towards risk mitigation efforts.

While compliance with regulations and setting financial goals are important aspects of an organization's operation, they are not the primary objective of a risk framework. Instead, these elements may be influenced by the insights gained from an effective risk management process established through the framework. Moreover, the purpose of a risk framework is not to limit risk control options but rather to define them, ensuring that diverse strategies and actions can be considered and implemented to address risks effectively.