As the years go by, there are rapid changes that affect the running of a business. The past 18 months truly embody that perspective. Companies are now growing to global standards with intricate supply chains. This necessitates the management of the growing list of regulations. The rapid growth of social media also means that their operations are now critically looked into by both current and prospective clientele. The idea to use more quantitative tools to evaluate how you operate your business is more necessary than notion. This enables you to measure outcomes and understand the inputs to your business processes, then assess the risks before you make any significant decisions.
The main benefits of operational risk management are:
Improving the reliability of business operations
Improving the effectiveness of the risk management operations
Strengthening the decision-making process where risks are involved
Reduction in losses caused by poorly-identified risks
Early identification of unlawful activities
Lower compliance costs
Reduction in potential damage from future risks
Upon research of industrial sectors within several countries, some strategies seem to stand out and they include:
Introduction of risk accountability within the organization. The employees of an enterprise at every level should be trained to follow risk-based thought processes in their running of daily activities. They should therefore be held responsible for risk occurring in their area of operation.
Regular risk assessment. This ensures that companies follow the introduced requirements and prioritize the management of risk. The frequency of the assessments should be determined by the specific nature of the company and its size.
Leadership backed by the organization. Operation risk management can be most effective when upheld at the top of the organization, before moving to the lower levels of the company.
Establishment of performance indicators and proper metrics to assess the performance. This ensures the proper resources and effort based on the risk profile within the organization. Many firms outsource for the development of the metrics.
Prioritize and quantify risk. Risk is normally quantified according to its severity and probability. It is calculated according to the benefits and costs of alleviating a risk in comparison to the potential exposure. This enables the effective targeting of risks to be mitigated.
Regular communication. Coming up with a regular timetable for communication on operational risk management is a proper way of reinforcing the importance of the subject within the enterprise. Communications should be customized according to the levels of the organization.
Use well-documented, consistent, and effective controls. Control measures put in place to mitigate identified risks are necessary. Most companies usually feel that they already have the requisite controls put in place, but they are not usually cost-effective. This, therefore, implies that they look for better options to control and manage identified risk.
Avoid using operation risk management for rule-breaking rather than for risk. Upon refraining from using operational risk management for testing for violation of rules and using it for reducing risk exposure, it adds value to the business.
Looking for a combination of the above, or something more personalized? Let’s schedule a conversation to explore an option tailored for you.
