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Operational Risk Management

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Operational Risk Management
Operational Risk Management

Operational Risk Management, otherwise known as ORM, is defined as a continual recurring process which includes risk assessment, risk decision making, and execution of risk controls, which results in acceptance, mitigation, or avoidance of risk. It is the oversight of operation risk, which is a risk arising from execution of a company’s business functions. It is a very wide concept which focuses on the risks arising from the people, systems and processes through which a company operates. It also includes other categories like fraud risks, legal risks, physical or environmental risks. As for ORM, some include the risk of loss resulting from insufficient or failed internal processes and systems; human factors; or external events.

There are different factors and/or processes that need to be taken into consideration when talking about the ORM process, which may influence the outcome, and the input needed to balance it in a positive way.
Our first factor that comes into play is known as “risk”, and it is simply made up of two main components, which may be known as loss and probability. When combining these two together, they may indicate how much we can expect to suffer as a result of unwanted or unplanned events, also known as exposure to risks. Loss is just but a reflection of financial loss arising from an incident. Financial loss may include but not limited to credit, lost of opportunity, fines, penalties, and restrictions. Loss can also be in qualitative measures like reputation, image, morale, loyalty, confidence, credibility. Probability on the other hand, is a qualitative measure of likelihood and is frequently applied due to the lack of statistical data.
Our next factor is known as “risk profile”, and is defined by three elements, each is uniquely characteristic of the organization and substantially defines the execution and cost of its ORM plan. The first element is known as threat profile and it reflects the importance of

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