Operational Risk Management
Operational Risk Management
Operational Risk Management (ORM) is the process of identifying, assessing and mitigating the risks associated with an organization’s operational activities. These risks stem from various sources, such as internal processes, systems, people, external events and the broader business environment. Effective operational risk management helps organizations reduce the likelihood and impact of adverse events, safeguard their reputation, and enhance overall resilience.
Key aspects of ORM:
- Risk Identification
- Risk Assessment
- Risk Mitigation
- Risk Monitoring
- Risk Reporting and Communication
- Compliance and legal considerations
- Crisis Management and Business Continuity
- Culture and Employee Engagement
- Technology and Tools
- Continuous Improvement
FAQ
Operational risk management is crucial because it helps organizations anticipate, prevent, and respond to risks that can impact their financial stability, reputation, and regulatory compliance.
Operational risks are identified through techniques like risk assessments, scenario analysis, historical data analysis, expert opinions, and brainstorming sessions.
Common sources of operational risk include employee errors, system failures, fraud, supply chain disruptions, regulatory changes, natural disasters, and cybersecurity threats.