Operational Risk

In: Business and Management

Submitted By ahunter14
Words 887
Pages 4
Operational Risk
Key Term
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. Operational risk must also include monetary damages that occur outside the realm of human decision-making, such as natural disasters or communication failures. Any action that causes a disruption to routine business operation is considered an operational risk. The more information used to calculate operational risk, the more complete and reliable picture is created for total risk evaluation (Mittnik, Paterlini, & Yener, 2014, p. 102). It is imperative to have accurate data to make quality decisions, and to create processes for predicted failures to minimize impact on the corporation.
Major Article Summary
Operational risk assessment should be a common, daily occurrence within an organization and should be implemented in every process in place. Corporations should implement an operational risk management program that all employees subscribe to; one that goes beyond simply ensuring against risk. Oftentimes, organizations, and the employees themselves, are the biggest source of operational risk (Enescu & Enescu, 2010, p. 312). Operational risk management must account for assessment and mitigation of processes that impact the daily business of the corporation. The most…...

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