• Industrial Manufacturing

4 Reasons to Improve Operational Risk Management in Manufacturing

September 12, 2017 By
There are different types of risks, even though many are intertwined: financial risks, reputational risks, operational risks, supply chain or third party risks, compliance/legal risks, and others. Many people view operational risks through the lens of safety management: improving worker and process safety leads to more productive operations, while the mitigation of operational risks – created by improperly maintained (or malfunctioning) equipment or by the presence of workplace hazards – reduces injuries and illnesses.

For manufacturers, it is important to see the link between safety and operational risk management. But the rationale for improving operational risk management goes beyond safety. The Aberdeen report “Optimizing Organizational Performance with Operational Risk Management” provides many compelling reasons to improve operational risk management. We share four in this post, which are backed by Aberdeen survey results included in the report.

1) Achieve Financial Goals

Many manufacturers see the relationship between mitigating operational risks and improving productivity. But Best-in-Class organizations have the foresight to go one step further and also see the link with financial performance. According to an Aberdeen survey, 52% of respondents said they need to reduce the impact of operational risks on financial goals. In addition, 42% of Best-in-Class companies align operational data with financial data to understand the financial impacts of adverse events.

2) Increase and Improve Collaboration

The successful achievement of financial goals represents a hard, quantifiable benefit. But implementing an operational risk management system also brings soft benefits, such as increased cooperation and collaboration. According to the same Aberdeen survey, 47% of respondents identify effective collaboration across functional departments as a requirement to implement an operational risk management framework, which leads to the joint management of risks. The implementation of an operational risk management framework provides the incentive and catalyst for organizations to also improve cross-functional collaboration.

3) Standardize Risk Assessment

Best-in-Class manufacturing organizations understand that the successful mitigation of operational risks enhances the likelihood that corporate objectives will be met. To successfully mitigate operational risks, the same policies, procedures, and risk assessment methodologies must be applied across the company. By improving operational risk management, the Best-in-Class achieve greater standardization in risk assessments and elsewhere. 54% of Best-in-Class manufacturers have standardized risk quantification processes across the enterprise. That figure is 36% for all other manufacturers, meaning the Best-in-Class are 50% more likely to standardize risk quantification processes.

4) Build a Culture of Risk Awareness

In the Aberdeen survey, 41% of manufacturers said they need to build a risk awareness culture throughout the organization. By improving operational risk management, companies lay the following foundations that lead to risk awareness: 1) increased and improved collaboration, 2) standardization of risk assessments. Through a culture of risk awareness, manufacturers establish greater visibility into operational risks and control measures, and integrate a risk mindset in daily tasks, thus further reducing operational risks and their impacts on corporate and financial objectives.

Download the Aberdeen report by clicking on the image below to learn more about other reasons why manufacturing organizations should improve operational risk management, and the following:

  • How to improve organizational performance through operational risk management.
  • Key steps to mitigate risks.
  • Best-in-class strategies to achieve operational excellence.


Categories: Risk

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