The Different Risks Involved in Operational Risk ManagementThe term operational risk management refers to a continuous cycle of activities that includes risk analysis, risk selection, and risk implementation, that ultimately result in acceptance, modification, or prevention of future risk. To be more specific, the process consists of three phases, as follows:
Business Risk - This refers to the risk that is associated with business activities. This can include risks that are related to product failure, the quality of products or services, and even the safety of employees. However, operational risk also includes risks that are related to the organization's financial standing, which may include its ability to provide sufficient funding to sustain business operations, see here some of the advantage of operation risk management to your business.
Business Risk-This phase involves assessing the risks that may come about during a business activity. This is often done by identifying specific areas where there is an increased chance that an event can occur, as well as the factors that may cause such occurrences.
Mitigation-This phase focuses on removing or mitigating the risks that are identified through the business risk process. It can include methods of reducing the probability of risks, such as improving the security of a system, eliminating the possibility of an event occurring, or reducing the impact of risks on an organization's overall performance.
Prevention-This phase involves improving the likelihood of events that result in negative outcomes, such as loss or damage, from occurring. This is done by identifying and correcting risks, implementing preventive measures to reduce risks, and improving the security of the organization and its systems. In addition, it also focuses on addressing potential risks that may occur beyond the business, such as the risk of a crisis affecting the health and safety of the public. You can browse link to see the advantages of operation risk management to your business.
Operational risk is one of the key ingredients in business risk management. This is because it helps organizations and their management teams to focus their efforts on managing risks, reducing their impact on businesses, and preventing risks from occurring in the first place. By focusing on minimizing and eliminating risks in order to maintain business integrity, organizations are able to minimize their total risk profile, thereby increasing the level of organization performance and, while simultaneously lowering their risk profile.
Operational risk management can be applied across all kinds of business activities, including those that involve purchasing, selling, manufacturing, financing, and management. These activities can include any of the processes used in running a business.
Operational risk management can be implemented with a variety of methods, including risk management systems that incorporate several levels of risk analysis. It can also include using statistical techniques, which include methods such as regression analysis, contingency planning, and forecasting, and other methods. These methods allow business managers to understand and control risks by using mathematical methods.
While the operational risk management process can have a variety of applications for any business, it should not be viewed as a monotonous process. Instead, it requires continual monitoring and adjustment to keep it up-to-date and effective. You can get more enlightened on this topic by reading here: https://en.wikipedia.org/wiki/Operational_risk_management.