Many organizations struggle with the question of how to best manage operational risk. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. This can include everything from regulatory compliance risks to IT security risks.
Despite the fact that operational risk management (ORM) is a relatively new field, there are proven frameworks and methods that organizations can use to establish an ORM program. In this blog post, we’ll take a look at four steps your organization can take to implement an ORM framework.
Define Your Objectives
The first step in any risk management program is to define your objectives. What are you trying to achieve with your ORM program? Are you looking to improve efficiency, reduce costs, or mitigate risk? Once you’ve defined your objectives, you can start to put together a plan of action.
Identify Your Risks
The next step is to identify the risks that could potentially impact your organization. These risks can come from a variety of sources, both internal and external. Internal risks might include things like process failures or data breaches, while external risks could include things like natural disasters or changes in regulations. It’s important to take a holistic view of all the risks facing your organization so that you can develop a comprehensive ORM program.
Assess Your Risks
Once you’ve identified the risks facing your organization, it’s time to assess those risks. This involves understanding both the likelihood of a risk occurring and the potential impact of that risk. This information will help you prioritize which risks need to be addressed first and which can be mitigated through other means
Develop a Risk Response Plan
The final step is to develop a plan for responding to the risks you’ve identified. This plan should detail how you’ll deal with each risk, who will be responsible for implementing each response, and what resources will be required. By having a detailed plan in place, you’ll be better prepared to deal with any operational risks that may occur
Operational risk management is a relatively new field, but there are proven frameworks and methods that organizations can use to establish an ORM program. By taking the time to define your objectives, identify your risks, assess those risks, and develop a detailed plan for responding to them, you’ll be in a better position to manage operational risk effectively.