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FERMA opposes project to create risk standard

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BRUSSELS, Belgium—The Federation of European Risk Management Assns. said it does not see a need for the international standard for risk management that is currently under development.

In a position paper, which FERMA said is intended to help its member associations develop a common stance on the standard proposals, the risk manager organization said it believed a standard would not benefit European companies.

The risk manager group said it feared that an international standard would be too inflexible, and it rejected the idea of a certification process for risk management.

But a leading risk management standards expert said that many of the group's concerns about the standard are unfounded.

And the International Organization for Standardization stressed that the proposed standard--slated for introduction in 2009--is not expected to be a certifiable blueprint and is intended as a management tool, rather than a system that must be followed.

FERMA said it believed an ISO standard "would be too inflexible for such a broad discipline as risk management, which is extremely complex and varied in its application."

The Brussels, Belgium-based association urged caution about the term "standard" and said it would prefer the use of a term such as "reference guide, framework, general principles or list of best practice," to describe the ISO document under development.

It said it would support a generic guide on the essentials, principles and terminology of a risk management system.

FERMA said in a statement that an ISO standard may encumber companies with a need to devote substantial resources to complying with the standard, which may have "a serious effect on competitiveness, and considerable additional paperwork, without commensurate benefits."

In the position paper, FERMA also notes that industries already have to comply with many varied standards in areas such as quality control, environment and safety.

"However, experience has shown that compliance with a standard has never guaranteed totally satisfactory performance," it noted.

"Accidents continue to happen, and product liability claims continue to occur. Compliance with an ISO standard can, therefore, give a false sense of security to regulators, clients, shareholders and third parties. This is often aggravated by a certification process which is not always objective and varies greatly from one country to another," it added.

A spokesman for Geneva, Switzerland-based ISO said the organization did not wish to comment directly on FERMA's position paper, but said that ISO's current work on a risk management standard was an attempt to harmonize various blueprints in use around the world. It is unlikely that ISO will produce a certifiable standard, the spokesman added.

Kevin Knight, who headed the Australian and New Zealand effort to produce the world's first-ever risk management standard in 1995, and convenor of the working group on the ISO standard, said he had been trying to involve FERMA and the International Federation of Risk & Insurance Management Assns. in discussions on the proposed standard.

He said that the proposed standard would not be prescriptive.

"What we are producing is a process" that companies can weave into their risk management systems, he said.

The Australian and New Zealand standard does not dictate how companies should manage their risk, he said.

In response to FERMA's fears about certification, Mr. Knight said the ISO group is "purposefully" drafting its standard not to be for certification.

It appears that FERMA fears that ISO is attempting to define what is acceptable risk, said Mr. Knight, but this is not the organization's intention.

ISO is not seeking to make people risk-averse, but rather to manage their risks and take appropriate decisions, he said.

"We are not prescribing tools," he said. "But instead seeking to encourage an environment where risk is managed and understood from the top down and people are empowered to manage risks to help the company achieve its objectives," he said.