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How To Guide For Operational Risk Management

Operational risk applies to every individual in every business. Everyone encounters some risks that can get in the way of their job, decrease their productivity, or can even lead to errors that can jeopardize the company’s aims. Here, we’re going to look at the operational risk management that can help you eliminate those errors, and how to implement it.

Risk assessment

Managing risk means that you have to identify what those risks are, first of all. One of the most common operational risk factors is, for instance, human error. But risk assessment allows you to see when and where those errors are occurring. You need to carry out risk assessments on internal processes, people and systems, as well as those risks from external events. Risk assessment isn’t just a single audit, it’s an ongoing process. As time goes on, new risks will arise and your operational risk management will help you make certain risks much less relevant or prevalent.

Prioritizing risks

Risk assessment helps you identify which risks are more common, but operational risk management means that you have to prioritize them against the goals of the business. Identify what your aims are, whether it’s reducing operating costs, reducing losses, increasing customer satisfaction, or simply reducing insurance costs. Consider the organization’s achievements. There will be some risks that are more prevalent but not necessarily hindering your progress towards your goals, and some risks that are rarer, but significantly more detrimental to those achievements. Stakeholder expectations and trust must also be considered. Compliance with customer satisfaction, contractual obligations, and regulatory compliance must all be high priorities when putting together an operational risk management plan.

Systemization and standards

The steps above should help you identify which operational risks need to be addressed first. From there, you have to build an operational risk framework. Outline your standards that set the foundations for designing, implementing, monitoring, and consistently reviewing and improving risk management. This serves as a guide on how to, for instance, systematize certain processes in the workplace, including the steps that help to defend them against those operational risks. You can use these standards when planning a project, too, identifying those key operational risk components so that project plans implement steps to decrease them.

Implementation in training

Operational risk management is a process that has to happen across the whole business, with every employee involved. Every employee should have their own risk management duties, and your success in operational risk management depends entirely on your internal and external personnel’s ability to mitigate risk. This means that constant training and the use of key performance indicators to measure the individual employee’s operational risk management is essential. Not every employee needs to know every detail of your operational risk framework, so make sure that you’re training them in only the aspects that are relevant to them.

Operational risk management is extensive work, and making it effective is about risk assessment, identifying which risks are most prevalent and most harmful to business goals, and implementing risk management standards across the workplace.

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