Even as operational risk tries to identify and manage risks for people, processes and systems, operational risk management is a discipline and behavior that needs to be put in place. As part of the process, a framework to control the process is recommended. The framework is a set of integrated tools, processes, and mitigation strategies that assists a company in managing, measuring, and monitoring operational risk. Some of the benefits of establishing this frame work are: understanding risk as an opportunity rather than just a threat, gaining the ability to leverage competitive advantage by focusing on key success factors, improve managements understanding of operations, enhance shareholder value by reducing the downside risk and maximizing the upside, and providing senior management with a clear view of the risks they are taking and avoiding. This framework can be broken down into the following:
- Governance,
- Planning,
- Execution,
- Visibility, Optimization, and
- Integration.
Each of these areas will be discussed in detail in future blogs.
Do you have a formal frame work for managing risk? If so what is it?
This posting is the fifth of a series of blogs will discuss various factors of operational risk management as it pertains to manufacturing organizations. Please feel free to comment and discuss this series.
