operational risk management?

Answer 1

What is operational risk management (ORM)

Operational risk is often seen to be of relevance only to banks and the financial industry, but in fact it is a facet of every organisation and reflects the inevitable fact that assets, processes and people can fail, leading to effects that are unplanned and unwanted by the business.

Examples are not hard to find;
* A computer fails and a day's work is lost. We pay overtime to catch up,
* A manager underestimates task complexity and a project over-runs,
* Subsidence causes a building to be declared unsafe and evacuated.

The definition used in the Second Basel Accord describes operational risk as:
"...the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events"

What is the scope of operational risk management?
Operational risk is recognised as being distinct from market risk and credit or trade risk (although an operational failure may result in a loss of control and an increase in exposure in these areas also). However, as the definition suggests, ORM confines itself to managing those elements that fall within the business operational remit. 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.

You can read more at the link below.

Answer 2

Go to the site of Bank for International Settlements and read all about operational risk and guidance on how to manage risks.