RISK MANAGEMENT FROM AN OPERATIONAL PERSPECTIVE

Risk Management from an Operational Perspective



Table of content

Introduction1

Managing operational risk is an important aspect of any operational institution. Operational disasters have proved that millions of dollars can be lost through poor operational management and supervision of operational risks. An operational manager is not only interested in the returns from the investments in a market but also the possible extreme and abnormal returns that seem possible. Without a careful analysis of the potential danger, the investment could cause catastrophically consequence when a shock occurs. With the experience of recent failure of large operational institutions, sufficient risks control measures are clearly essential and the regulators have started to set restrictions on limiting the exposure to market risks. Value at Risk context says that precise prediction of the probability of an extreme movement in the value of a portfolio is essential for both risk management and regulatory purposes. Value at risk has so far been the most popular in determining operational risk in operational institutions and most risk managers feel that it could have prevented operational disasters1

Principles2

Accept No Unnecessary Risk3

Make Risk Decisions at the Appropriate Level3

The (Operational) Risk Management Process5

Identification5

Evaluation5

Procedure Management6

Reporting and Monitoring6

Integration into an Enterprise Risk Management System6

Identify, measure, monitor, control and report operational risks throughout your organization9

Products14

Features14

Benefits15

Conclusion16

Risk Management from an Operational Perspective

Introduction

Managing operational risk is an important aspect of any operational institution. Operational disasters have proved that millions of dollars can be lost through poor operational management and supervision of operational risks. An operational manager is not only interested in the returns from the investments in a market but also the possible extreme and abnormal returns that seem possible. Without a careful analysis of the potential danger, the investment could cause catastrophically consequence when a shock occurs. With the experience of recent failure of large operational institutions, sufficient risks control measures are clearly essential and the regulators have started to set restrictions on limiting the exposure to market risks. Value at Risk context says that precise prediction of the probability of an extreme movement in the value of a portfolio is essential for both risk management and regulatory purposes. Value at risk has so far been the most popular in determining operational risk in operational institutions and most risk managers feel that it could have prevented operational disasters

The term Operational Risk Management (ORM) is defined as a continual cyclic process which includes risk assessment, risk decision making, and implementation of risk controls, which results in acceptance, mitigation, or avoidance of risk. ORM is the oversight of operational risk, including the risk of loss resulting from inadequate or failed internal processes and systems, human factors, or from external events. is a decision-making tool to systematically help identify operational risks and benefits and determine the best courses of action for any given situation (Tricker, 2007). Operational Risk Management, or ORM, is a decision-making tool that helps to systematically identify risks and benefits and determine the best courses of action for any given ...