Operational risks, often lurking in the shadows of every decision and action, can have profound implications for an organisation’s success and longevity. For C-level professionals in safety, security, risk, and operations roles, mastering the art and science of mitigating and managing these risks is non-negotiable.
Operational risk encompasses potential losses resulting from inadequate or failed internal processes, people, systems, or external events. Unlike financial or market risks, operational risks are often harder to quantify and predict. Yet, the need to know how to mitigate and manage operational risk remains a top priority for businesses worldwide1.
The Role of Security and Safety in Managing Operational Risk
Security and safety are foundational in learning how to mitigate and manage operational risk. Ensuring the physical safety of assets, employees, and operations is paramount. A robust Global Security Operations Centre (GSOC) can play a pivotal role in monitoring threats and coordinating responses in real-time2.
Challenges in Calculating Impact
Understanding how to mitigate and manage operational risk requires grappling with challenges in:
- People: Measuring potential harm to employees or the public.
- Assets: Quantifying the cost of damaged equipment or stolen intellectual property.
- Supply Chain: Accounting for disruptions that affect suppliers and customers.
These challenges underscore the complexity of operational risk management3.
The Power of Real-Time Data in Operational Risk Management
Harnessing real-time data is crucial in understanding how to mitigate and manage operational risk. Companies lacking this capability might be slower to respond to threats, leading to increased damages. For instance, operational failures can lead to significant business disruptions, underscoring the importance of real-time data4.
Opportunities and Benefits of Impact Calculation
By mastering how to mitigate and manage operational risk, companies can:
- Prioritise Resources: Direct resources to the most significant threats.
- Improve Response Times: React swiftly to emerging threats.
- Enhance Stakeholder Trust: Boost confidence among investors, customers, and employees.
Effectively managing operational risks can reduce associated costs significantly, while also enhancing reputation and operational efficiency5.
The Risks of Inaction in Operational Risk Management
Failure to understand how to mitigate and manage operational risk can have dire consequences. Beyond immediate financial implications, companies might face reputational damage, loss of customer trust, and legal repercussions6.
With a proactive approach, informed by real-time data and a deep understanding of potential impacts, businesses can navigate the challenges of the modern world, ensuring growth, innovation, and long-term success.
You can book a demo on resilienceOS here to discover how you can better mitigate and manage risk from multiple sources and across multiple sites, regions and geographies.
_________________________
1 Regret Bounds for Risk-Sensitive Reinforcement Learning ↩
2 Board of Governors of the Federal Reserve System: An Approach to Quantifying Operational Resilience Concepts ↩
3 A Comprehensive Survey on Enterprise Financial Risk Analysis ↩
4 Federal Reserve’s 2021 Financial Stability Report ↩
5 The Empirical Reality of IT Project Cost Overruns ↩
6 Federal Reserve’s 2021 Financial Stability Report ↩