Types of Operational Risk Management - Types of ORM - datasurfr - MitKat Advisory

Operational risks are the uncertainties and obstacles that an organisation faces while running its day-to-day operations and activities. These obstacles usually result in disruptions in business plans, procedures, and operations and need prompt action. 

There are several types of operational risk management (ORM). This blog delves into the various types of ORM and risks involved and explains each of these briefly. 

Types of Operational Risk Management:

  1. Internal Fraud: The first type of operational risk management falls under the category of internal fraud. Internal fraud involves internal stakeholders evading safeguards and misappropriating company resources and finances, subsequently resulting in losses to the organisation. 
  2. External Fraud:  Apart from internal employees or stakeholders committing fraud, external actors may also attempt to plot against an organisation. Such a type of operational risk management can be committed via several mediums including cyber-attacks, forgery, bribery, and corruption. 
  3. Technological Failures: In today’s age of information, technology plays a very crucial role in the smooth functioning of business operations. Hence, technology holds a big space when it comes to types of operational risk management. However, any adverse impact on technology can result in a major obstacle to operational risk management. 
  4. Safety: Another pivotal type of operational risk management is the safety of the physical and other assets of the organisations. Any detrimental impact on the safety of employees, resources, and assets can hinder business operations. 
  5. Natural disasters:  With the increasing impact of climate change on operations, monitoring and assessing natural disasters becomes important. This type of operational risk management can present itself in the form of extreme temperatures, torrential rainfall, or earthquakes and tsunamis. Such events could have a damaging impact on business assets and logistics. 
  6. Process execution and management: Any fault in the execution of certain processes and management plans also represents a form of operational risk. This type of operational risk management often involves the failure to execute and implement an appropriate strategy or mitigative measures to avert losses. 
types of operational risk management - datasurfr - MitKat Advisory

Effective identification of the types of operational risk management is vital for organizations to navigate the dynamic and complex landscape of uncertainties in their day-to-day operations. Addressing various types of operational risk management requires a comprehensive and tactical approach.

Organizations must remain cautious in implementing robust safeguards and protocols to prevent internal and external fraud, safeguard technology infrastructure, ensure the safety of physical assets and personnel, and prepare for the impact of natural disasters. Additionally, close and active attention to process execution and management is crucial to avoid disruptions and losses.

Through datasurfr, we at MitKat help in understanding and mitigating these Operational Risk Management Types. Organizations can enhance their resilience, maintain business continuity, and protect their reputation and financial stability.

Continuous monitoring, regular risk assessments, and the integration of advanced technologies in risk management processes contribute to building a resilient framework that can adapt to evolving challenges in the dynamic business environment. In essence, operational risk management is not just a proactive measure but a strategic imperative for sustainable and successful business operations.

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