The Guide to Operational Risk Management (ORM) is the science of an organization managing its procedures and processes, intending to mitigate, avoid or assess risks that could disrupt a business’ day-to-day activity and management by eliminating or minimizing risks before the organization makes a critical decision.
How It Works
The organization has to consider the different aspects of its objectives, thus striving to decrease and control risks to an acceptable and manageable level to increase the chances of achieving the organization’s objectives.
Why Your Organization Should Have an ORM Plan
Having good Organizational Risk Management has a lot of benefits to your organization such as: good customer ratings, satisfaction levels, ensuring that you maintain your current existing customer base and attract new ones. Thereby, keeping all your consumers happy and your organization sustainable.
Your organization will also get a better insurance plan. Reduction in losses from the damages incurred to your organization due to better decision-making. Lower cost compliance. Better and informed risk-taking and organization’s policy. Demonstrating to clients and stakeholders that the company is reliable and stable even through tough economic times.
Better organizational regulatory compliance to the governmental policy achieving an organization’s objectives, while ensuring normal business operations remain undisrupted during a risk occurrence.
The Steps in ORM include:
Risk Identification – For an organization’s objectives to be met, an organization needs to identify what is preventing it from meeting its objectives. Thus understanding the risks facing the business.
Risk Assessment – This is understanding the likelihood of a risk incident occurring to the business at a particular time, thus ordering them systematically in order of occurrence.
Risk Mitigation – If the risks facing the organization’s objectives are unavoidable, the organization may accept, control or transfer the risk.
Control Implementation – An organization can strive to decrease the amount of damage dealt with the organization by an occurrence of a risk.
Monitoring – This is testing the means of controls by an organization’s procedure or process in trying to reduce the mistakes that occurred by the control method.
Four Principles guide the above steps:
Accept no unnecessary risks
Anticipate and manage risk by planning
Risk decisions are made at the right organizational level
Deciding the right risks the organization should incur in the right relation to its benefit to the organization
