Operational risk management
Operational risk management (ORM) is a continual recurring process that
includes risk assessment, risk decision making, and the implementation of
risk controls, resulting in the acceptance, mitigation, or avoidance of risk.
Every organization faces circumstances or fundamental changes in its
situation that can present varying levels of risk to that business, from
minor inconveniences to a situation that could put the entire company at
risk.
Examples of operational risk include:
Employee conduct and employee error
Breach of private data due to cybersecurity attacks
Technology risks tied to automation, robotics, and artificial intelligence
Business processes and controls
Physical events that can disrupt a business, such as natural disasters
Internal and external fraud
The Basel Committee on Banking Supervision has described the
operational risk as: “the risk of loss resulting from inadequate or failed
internal processes, people, and systems, or from external events. As such,
operational risk captures business continuity plans, environmental risk,
crisis management, process systems, and operations risk, people-related
risks and health and safety, and information technology risks.”
Operational risk management is often discussed in the context of financial
services.
Operational risk management (ORM) is a continual recurring process that
includes risk assessment, risk decision making, and the implementation of
risk controls, resulting in the acceptance, mitigation, or avoidance of risk.
Every organization faces circumstances or fundamental changes in its
situation that can present varying levels of risk to that business, from
minor inconveniences to a situation that could put the entire company at
risk.
Examples of operational risk include:
Employee conduct and employee error
Breach of private data due to cybersecurity attacks
Technology risks tied to automation, robotics, and artificial intelligence
Business processes and controls
Physical events that can disrupt a business, such as natural disasters
Internal and external fraud
The Basel Committee on Banking Supervision has described the
operational risk as: “the risk of loss resulting from inadequate or failed
internal processes, people, and systems, or from external events. As such,
operational risk captures business continuity plans, environmental risk,
crisis management, process systems, and operations risk, people-related
risks and health and safety, and information technology risks.”
Operational risk management is often discussed in the context of financial
services.
