Operational Risk Management

2081 Words Aug 29th, 2010 9 Pages
Operational Risk Management

Operational Risk Management, otherwise known as ORM, is defined as a continual recurring process which includes risk assessment, risk decision making, and execution of risk controls, which results in acceptance, mitigation, or avoidance of risk. It is the oversight of operation risk, which is a risk arising from execution of a company’s business functions. It is a very wide concept which focuses on the risks arising from the people, systems and processes through which a company operates. It also includes other categories like fraud risks, legal risks, physical or environmental risks. As for ORM, some include the risk of loss resulting from insufficient or failed internal processes and systems; human factors;
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It is an expressive list of the threats that currently affect the organization with estimates of probability. The latter identifies weaknesses in the business that allow threats to spread with great disruptive effect. The assessment combines impact analysis and probability data to prioritize the plugging of gaps, proposing, cost-justifying and comparing strategies for improvement.
Then we have what is called “continuity planning” which offers the ultimate backstop where risk improvement measures have known to be unsuccessful or were unsuitable and the organization faces great disaster. It identifies what people, processes, systems, and other structures must be provided to the firm in good time to guarantee and preserve its ability to exist.
Last but not least, we have “assurance”, which is nothing but a set of activities that help guarantee that your continuity provisions work. Training encourages staff to build up a consistent understanding of risk and continuity issues , building familiarity with aspects that could affect them. Periodic review or audit ensures your continuity provisions still reflect the needs of the business. Preparation and testing offer controlled means of simulating real incidents, ironing out problems under safe conditions

In addition to this, both the U.S. Department of Defense and the U.S. Navy have come up
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