Operational Risk Management and Business Resiliency: How Do They Work Together?

Operational Risk Management and Business Resiliency: How Do They Work Together?

Preparing for and responding to negative occurrences, ranging from the commonplace to the disastrous, the foreseeable to the unexpected, has become a way of life for enterprises and governments all over the world. To understand the gravity of the problem, we just need to look at the daily reports of cyberattacks on governments, organizations, and individuals.


To address these threats, you’ll need an integrated and holistic framework that can identify, analyze, and define appropriate actions for the situation. For a growing number of businesses, this involves implementing an operational risk management strategy. In the face of business challenges, this comprehensive approach provides organizations with a stronger framework for minimizing risk while promoting their goals and prospects.


However, in order to execute and maintain this enterprise-wide approach, two traditionally separate responsibilities inside the company—business resiliency and risk management—must work together more closely.


Operational Risk Management and Business Resiliency: How Do They Work Together?

In its most basic form, risk management is concerned with reducing the likelihood of and damage caused by bad events. As the term suggests, operational risk management must deal with interruptions at the operational level. Understanding that systems, people, facilities, and general operational activities are all flawed, the goal of operational risk management is to eliminate or reduce the likelihood of an event. Risk managers aim to prevent events by focusing on incident-specific, site-specific investigation of likely causes of disruptions. If eliminating the risk is not achievable, the attention shifts to limiting the unfavorable event’s consequences.


Suppression devices, for instance, limit the possibility of fire damage disrupting operations. Redundant equipment reduces the likelihood of a machine failure disrupting operations, while redundant communications help preserve connectivity.


However, devising methods to reduce the likelihood of an incident affecting an organization will not prevent the occurrence from occurring. A tornado, tsunami, or other hugely devastating disaster cannot be prevented no matter how well prepared you are. Recognizing that not every occurrence can be avoided, our other line of defense is to reduce the impact. That’s when business resilience comes into play. Business resiliency is focused on reducing the impact of an event on an entity and promptly and safely returning the company to normal operations and delivery of products and services. In a nutshell, business resiliency aids in an entity’s survivability in the face of adversity.


Business resilience can group effects into four unique categories since it is event-neutral:


  1. Facilities are rendered inaccessible or unusable as a result of the effects
  2. Supply chain disruptions, processing errors, and staffing shortages all have an impact on operational capability
  3. Effects on technology
  4. Effects on the organization itself, ranging from financial problems to intellectual property rights

Important Steps to Boosting Your Resiliency

Through operational risk management, a company can become more resilient in three important ways:


  1. Break down silos: The company must determine which data is critical to provide. To become more resilient, data from various risk and continuity programs must be integrated. It is critical that data not be separated. Organizations will find the data points, relationships, and important resources that enable them to deliver services or products regularly, competitively, and effectively by breaking down program silos.
  2. Create a uniform data collection that can be used for risk and continuity management: Using a consistent data collection that is integrated across the company is critical for both preventive and reactive risk management. Management can implement educated decisions that consider proactive risk mitigation strategies while recognizing their ability to adapt to operational disruptions or disasters by adopting a uniform vocabulary for how critical risk data and metrics are defined. Without it, a company’s capacity to make informed risk mitigation decisions or respond to a major interruption may be hampered.
  3. Get a clear picture of operational performance and success measures: The business will be able to more easily and precisely understand how, when, and what to improve to remain doing business in the most effective way possible while remaining adaptable and prepared to respond to unforeseeable situations by breaking down silos and developing a single data set. This gives the company the ability to continue offering products and services to clients and consumers despite changes in the marketplace.


The entire company is affected and influenced by operational risk. As a result, operational risk programs must become more integrated with the whole range of risk and continuity considerations. Because of today’s unpredictability, most firms require a combination of risk management and business resilience. The mix will help to reduce risk and provide a more stable working environment.


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