How can you use operational risk management to navigate global uncertainties?

1 What is operational risk management?

Operational risk management is the process of identifying, assessing, controlling, and monitoring the potential sources of loss or harm that may arise from your business activities, processes, systems, or external events. ORM aims to reduce the likelihood and impact of operational failures, errors, disruptions, or incidents that may affect your performance, reputation, compliance, or customer satisfaction.

2 Why is operational risk management important?

Operational risk management is essential for protecting your business from global uncertainties. ORM can help you enhance resilience and agility in adapting to changing conditions, improve decision-making and problem-solving skills, strengthen governance and accountability structures, foster a culture of risk awareness, and boost stakeholder confidence and trust. All of these factors contribute to a successful business.

3 How to implement operational risk management?

Operational risk management is an ongoing and dynamic process that necessitates consistent review and improvement. To implement ORM efficiently, you must define your risk appetite and tolerance levels that reflect your strategic objectives and values. Additionally, you should create a risk register and matrix to identify and prioritize key operational risks, as well as their causes, consequences, and controls. Risk mitigation plans and actions should be developed to address the gaps and weaknesses in your risk controls, while monitoring and measuring your risk performance will track and evaluate your risk outcomes. Finally, it is essential to review and update your risk policies and procedures to document and communicate your risk management approach.

4 How to leverage operational risk management?

Operational risk management is not only a defensive tool, but also an offensive one. It can help you to leverage your operational capabilities and opportunities in the face of global uncertainties. To do this, you should employ risk scenarios and simulations to test and challenge your assumptions and preparedness for various situations and events. Additionally, utilizing risk analytics and intelligence can provide you with valuable insights and information to support your decision-making and innovation. Risk communication and reporting can inform and engage your stakeholders and customers about your risk management activities and achievements. Lastly, implementing a risk culture and learning system can encourage and reward your employees and partners for their risk awareness and contribution.

5 How to improve operational risk management?

Operational risk management is an ongoing journey that requires constant learning and improvement. To make progress, you can seek feedback from stakeholders and customers, benchmark your risk performance and practices with peers and competitors, seek external advice and support from experts and consultants, and review your risk incidents and experiences. These steps can help you to identify and address customer needs, adopt best practices and standards, access specialized knowledge and skills, as well as identify and implement corrective and preventive actions.