Everyone’s been talking about it, so let's understand what operational risk management is. Most business faces precedences or foundational changes in its lifecycle that present different levels of risks, from minor inconveniences to ones leading to an existential crisis. Our methodology of operational risk management oversees and strategizes these very same risks. It acts as an umbrella for myriads of risks like IT risks, environmental risks, business continuity policies, crisis management, and people related risks and much more.

Not only do organizations face a harsh, continually evolving regulatory landscape and new threats such as cyber-attacks make it more challenging than ever. While regulatory applications remain a crucial driver of risk management, financial services firms are under pressure to revise their strategies to focus on new emerging threats. Our effective operational risk management increases transparency and enables informed risk-taking practices. We help you implement ORM strategies, tools and processes into your objective goals to achieve better performance, higher brand recognition and derive sustainable financial results.

Here is a brief understanding of the operational risk management framework and how many steps are there in the operational risk management process.

ORM Framework

The first and foremost stage of any operational risk management strategy is to understand the nature of one's business and the risks associated with it. Spending time on risks not associated related to your business is nothing but a wastage of valuable time. The three levels of operational risk management to choose from:

1. In-depth: As the name suggests, a thorough assessment of all foreseeable aspects deliver the best results. Ideal for new projects or business ventures.
2. Deliberate: Initiated at various stages of a project or venture, usually implemented in the form of routine checks and performance reviews.
3. Time Critical: This ORM involves a sense of urgency. Usually, it gets implemented in the middle of operational change with limited time for execution before the consequences arise.

Our process for time-critical operational risk management:

• Situation Assessment
• Balancing Resources
• Communicate Risks and Intentions
• Determine and Examine

Operational Risk Management in Banks

A bank’s operational risk strategy guides risk tolerance, policy and processes for daily management. Banks establish policies and frameworks and also periodically reviews them to make sure they align with regulations, business practices and growth strategies.

The conventional approach to operational risk management centers around limiting risks and its consequences, but many banks have implemented sound practices with robust frameworks supported by new-age technology for effective management. The former approach concentrates more on risk measurement rather than risk mitigation, and the opportunities related to innovation, growth and competition are limited. The latter approach has developed the ability to move forward with rewarding but risky areas of businesses by enabling systematic business processes and efficient risk management strategies.

Challenges faced by ORM

Businesses struggle to support a risk culture that advocates risk accountability, appropriate risk escalation and understands operational risk losses. Companies need to develop firm ORM plans. But leaders face several challenges:

• The process is diverse and complicated

Operational risk management has become more complicated to manage as organizations are directed by advanced technologies, globalization, competitions and profit margins.

• The function is concealed

Many organizations incorporate risk management into their compliance, IT or other features making it really tough to figure out the functionality.

• Systems and programs are uncoordinated

Many organizations find themselves trapped with manual incoherent systems and metrics, the report on which is made for the sake of compliance and regulations.

Seven Step Approach To Mitigate Operational Risks

Generally, operational risks get better discovered, controlled and reduced using a seven-step approach supporting multiple aspects.

1. Segregate Tasks

Adequate segregation of tasks and duties reduce internal theft and risks related to fraud. It prevents individuals from taking advantage of the many aspects of transactions and business processes or practices.

2. Curtail Business Process Complexities

Reducing complications in different business processes significantly mitigate operational risks. Organizations can achieve that by lowering manual activities and the number of people and exceptions that arise during the implementation stage.

3. Reinforce Organizational Ethics

Building strong ethics within an organization is highly effective in mitigating operational risk management. Organizational ethics can be strengthened by uniting the personal values and principles of the workforce with the ideology of the organization.

4. Right People For The Right Job

Obtaining the right people for the right jobs can reduce issues related to business process execution and usage of skills and technology. This also results in proper personnel utilization, adherence to timelines, improved quality, and fewer errors and process failures.

5. Regular Monitoring And Evaluations

Business processes are more efficient with well-designed performance markers in place. Key Performance Indicators (KPIs) are vital for apt detection and mitigation of risks, provided they are continuously monitored and reviewed. This helps to identify inconsistencies and manage them accordingly.

6. Periodic Assessments

Regular assessments of all aspects of operational risks support organizational management. It is necessary to be risk-ready by assessing regulatory obligations, IT assets, skills, capabilities, processes and business decisions.

7. Analyze And Learn

Risk incidents and various corrective activities utilized in the past make way for some of the most successful strategies to neutralize future risks. Previous risk incidences help to execute a stronger, practical operational risk management framework. It also supports real-time revisions that suit the current operating setup.

How TRC can help

TRC Corporate Consulting helps you turn complex operational risks into opportunities for growth, resilience and long term advantages. We challenge the conventional approach of operational risk management by reshaping or tailoring the design, focus and capabilities of the typical operational risk framework.

The outcome? Organizations partner with TRC to implement and execute ORM programs to gain competitive advantage, a stronger brand reputation and sustainable financial returns. Join hands with us and be our valued partner for any operational risk management services. If you have any queries or need any understanding of our services, contact us now!