Introduction On Operational Risk Management
Operational risk management is akin to ensuring that one's business runs like a clock that has been well oiled. Every business is trying to improve their operations and they want to become faster and even better than their competitors. If one has to ensure that one's company is growing consistently, one needs to evaluate the risks as well as understand and manage one's operations in an effective manner. Operational management thus ensures that one's company is running smoothly and all issues are resolved immediately as well as risks mitigated which can bring down one's operations and make the company incur losses.
Operational Risk Management In Different Organizations
Operational risk management in case of different organizations may have different meanings. Every organization has different operations which are being run and hence, the kind of risks that such operations have are bound to be different. The risks of a manufacturing set up are different from a service industry and their operations. However, the essence of managing operational risk and the process involved remain the same. One has to initially establish a process whereby all the operations of the organization would be covered; then the risk management process needs to be enhanced through reviews and feedback, providing updates and through regular evaluation.
Operational Risk Management – Setting Up A Process
When one begins operational risk management, one initially sets up a process of identifying the flow of activities. One need to review the different steps of operation which are involved and a work flow diagram is formed. Even if the operational process and its workflow are not established yet, it is a good time to start. Once the different procedures and the work flow are established, then it is easier to highlight what are the areas of risk that need to be considered.
Operational Risk Management – Areas Of Risk
In operational risk management, once the areas of risk are highlighted, the process tasks to put in place in order to mitigate such risks should be laid down. Only risks which have high probability or will have high impact should be considered. When the areas of risk are highlighted, one should review the process tasks in order to understand where the control points should be established in order to prevent the risks from turning into reality. The next step consists of identifying the procedures that should be undertaken in order to mitigate risks.
Operational Risk Management – Mitigation Procedures
In operational risk management it is important to define the risk mitigation areas and the corresponding procedures. Once the operational risk areas are identified and back up plans are provided, one should put down procedures for risk mitigation. These are usually decided upon by the department heads of an organization who get together and decide on what procedures will be implemented in case of risk management. Operational risk is inherent in all forms of industries and hence, risk management in such spheres affects all companies. Many consultancies offer their expertise specific to different domains to help manage operating risks.