7 Steps to Build a Framework to Manage Operational Risk
Aberdeen’s study on the Operational Risk Management side of manufacturing found that risk is no longer just a part of doing business; risk management must now be integral in a company. Company growth and increasing regulations have put a focus on risk management among stakeholders. Also, recent external events bring to light the importance of having a plan in place. Organizations looking to improve their management of risk should follow these steps:
Step 1: View risk as an enterprise-wide challenge
By managing risk enterprise-wide, a company will develop a unified picture for decision-makers and improve the organization’s ability to manage risk effectively.
Step 2: Standardize the risk assessment, quantification, and prioritization processes across the enterprise
This allows managers to make meaningful and better decisions regarding operational risk.
Step 3: Ingrain risk awareness into the culture
A risk management program relies on the workers to execute; if the workforce doesn’t buy in, the program will fail.
Step 4: Collaborate across functional departments to jointly manage risks
This allows different viewpoints to get a look at the problem, which helps to ensure risk is managed from all angles.
Step 5: Build a standardized framework with controls, escalations, and contingency plans to manage risk
This allows organizations to ensure and create value for their stakeholders, employees, and customers.
Step 6: Centralize the storage and dissemination of risk information
There are two benefits to implementing such a system: data accessibility and increased risk exposure to employees.
Step 7: Utilize software to maximize your operational risk management program
Technology helps to sift through the reams of data and highlight important and relevant information from the useless and unnecessary.
Best-in-Class companies implement an integrated and flexible risk management framework to successfully document and assess risks, define controls, manage audits, identify issues, and implement recommendations and remediation plans. Download Aberdeen’s “Operational Risk Management: Building a Framework to Identify, Assess and Remediate” report to learn more.