Operational Risk is the monetary risk that a corporation faces when people, processes, or system failures occur. The concept of operational risk is a constant in the workplace and has a major impact on decision making within the corporation. In my current workplace, we are considering a major change in workflow, and must measure the operational risk to the benefits of the proposed changes.
Explanation of the Key Term
Many factors must be considered when a change is proposed within an organization. Benefits and detriments must both be weighed in order to make the most informed decision; however, even after careful consideration, some decisions are poor. ...view middle of the document...
One important process that can lessen the impact of risk, is the use of internal audits. Audits can decipher problems and provide improvement plans, before the impact of the risk factor becomes too large. Integrating business process management with operational risk management will increase an organization’s chances of achieving optimal business performance (Enescu & Enescu, 2010, p. 314). Above all other factors, the leadership within the management team can have the largest impact on operational risk by setting the example for the corporation and keeping the mission of the corporation in the forefront.
All successful organizations must address the concerns that operational risk management discovers. In all the articles researched for this discussion, this concept was consistently in the forefront of every corporation’s management practices. Many corporations develop a strategy for the proper analysis and calculation of risk to maximize the organization’s rate of success (Radomska, 2014, p. 33). Other organizations use simulators in an effort to predict capital accuracy, precision, and robustness (Opdyke, 2014, p. 49). As in the originally researched article, these articles addressed the need for a consistent, measurable method by which to assess risks that threaten an organization.
Another common thread seen among the articles was the understanding that assessing risks is an extremely complex and challenging concept. It is a challenge to account for all the dependencies that could have an impact on the operational risk calculation (Mittnik et al., 2014, p. 84). Most successful companies facilitate these processes by using sophisticated mathematical calculations in their risk assessment. Utilizing these techniques may aid in risk assessment; however, it is still quite challenging, if not impossible, to develop a comprehensive list of all possible threats.
Operational risk assessment must be an ongoing,...