Thursday 13 December 2012

Operational Risk Management - MHA Consulting

By Melissa

What is Operational Risk Management (ORM)?

Operational risk is a component of every organization that reflects the unavoidable fact that assets, processes and people can fail. When any of these failures occur it leads to effects that are unplanned and unwanted by any business.? Examples of these risks are more common than you may believe.

  • A computer fails and a day?s work is lost. Now, overtime is needed to catch up.
  • A manager underestimates task complexity, which leads to a project over runs.
  • Subsidence causes a building to be declared unsafe and everyone must evacuate.

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Often, Operational Risk is seen to only be relevant to banks and the financial industry, but as you can see from the above three examples, this is not the case.

What is the Scope of Operational Risk Management?

Operational Risk Management confines itself to managing those elements that fall within the business operational responsibility. They include:

  • Process and procedural robustness and integrity
  • People, skills and training
  • Insurance and self-insurance
  • The supply chain, outsourcing, and inherited risk
  • Infrastructure, systems and telecommunications
  • Physical and information security

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Operational risk is recognized as being distinct from market risk and credit or trade risks.

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Source: http://mha-it.com/2012/12/operational-risk-management/

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