Final answer:
Operational Risk Management (ORM) is the systematic process of identifying, assessing, and controlling risks in operations. It involves understanding and mitigating risks related to business processes, human factors, technology, and external factors.
Step-by-step explanation:
Operational Risk Management (ORM) is the systematic process of identifying, assessing, and controlling risks in operations. It involves understanding and mitigating risks related to business processes, human factors, technology, and external factors.
Some key steps in ORM include:
- Identifying and assessing potential risks: This involves analyzing the various aspects of operations and identifying potential risks that could impact the organization's objectives.
- Evaluating and quantifying risks: Once the risks are identified, they need to be evaluated and quantified in terms of their potential impact and likelihood.
- Developing risk mitigation strategies: Based on the assessment, organizations develop strategies to mitigate the identified risks. This may involve implementing preventive measures, transferring risks through insurance, or accepting risks and developing contingency plans.
- Monitoring and measuring risks: Continuous monitoring and measurement of risks is essential to ensure that the risk mitigation strategies are effective and to identify any new or emerging risks.
- Reviewing and improving risk management processes: Regular review and improvement of the risk management processes are necessary to adapt to changing circumstances and ensure that risks are effectively managed.
Overall, ORM helps organizations minimize the negative impact of risks on their operations and achieve their goals.