The United States recorded more than 2.8 nonfatal workplace injuries in the year 2018. Such concerns form the basis for the emerging focus on Operational Risk Management.
ORM is a solution to emerging work-related threats. Incident and emergency management procedures are among the ORM measures.
Businesses face numerous risks in the cause of operations. These hazards may either be inherent to your business or a result of the external operational environment. With such levels of uncertainty, a risk management plan is a must.
Are you asking, “What is operational risk management?” Read on to find out everything there is to know about Operational Risk Management.
What Is Operational Risk Management?
Businesses operate as going concerns. The assumption is that your business will continue to make profits in the foreseeable future. But even so, management teams must continuously work at developing contingency measures.
Such measures will be in a bid to address any eventualities that would threaten the existence of your company.
The ORM principle originates from this notion. It refers to the constant cyclic process of risk assessment and risk decision-making. The process also involves the enactment of contingency measures and controls to avoid the occurrence or recurrence of risk(s).
Based on this definition, it’s clear that ORM entails a wide range of activities and procedures. But the main aim of undertaking this process is to enhance risk avoidance. Nevertheless, ORM also prepares businesses to accept when risks occur through mitigation.
How Does Operational Risk Management Work?
Now that your question on “What is Operational Risk Management” is answered, let’s understand how ORM works.
Business owners and managers must always operate in full realization of business risks. With this realization, it’s easy to implement the Operational Risk Management plan. The first step in any ORM strategy is to conceptualize the nature of your venture and all the risks inherent in the industry.
Each sector has unique hazards due to the operational dynamics. Recognizing and understanding each risk is vital. Once this is achieved, the next phase involves the determination of the specific level of ORM you would wish to embark on.
The Three Levels of ORM
There are three levels of ORM your business may decide from in your quest to understand and mitigate against risks.
In-depth
The first level in the ORM process refers to the in-depth approach. In an ideal setting, every business should undertake an in-depth ORM procedure for their business. A comprehensive ORM procedure would eliminate risks regardless of the uncertainty involved.
But with the reality of modern businesses, there’s always a limitation in the implementation of an in-depth ORM process. This level is time-consuming, which discourages most business owners from taking up this option. You must be willing to undertake staff training and develop new policies and procedures.
However, if you’re willing to take your time with the processes involved, an in-depth ORM strategy would be the best for any business. If you have the time and resources, then an in-depth method would be your best bet.
Deliberate
This is a more common ORM method adopted by most companies. Deliberate risk management is implementable within routine periods of your business’ life cycle. While it may not be comprehensive, it addresses emerging risks continually.
Are you keen on continuous ORM procedures while operating within considerate time limits? Then you should implement deliberate ORM methods.
Time -Critical
Is your business in the middle of specific operational changes, but you still need to undertake ORM procedures? Then time-critical ORM procedures would be the best option to consider. While you may be keen on implementing specific changes in your business, you need to be aware of any non-identified risks that may emerge.
Implementing an ORM strategy amid time and resource constraints has its fair share of challenges. As such, you need a high level of situational awareness. This makes the use of time-critical methods an important option during such instances.
Importance of Operational Risk Management
Business owners often wonder about the probable benefits of an ORM strategy. Well, you’ll derive numerous benefits from a successful operational risk assessment.
Safe and Secure Working Environment
Nothing is more important than having a safe working environment for your employees. The level of productivity automatically improves. ORM guarantees you this leverage when managing your business.
With the Environmental, Health & Safety Management Information Systems, you’ll be able to focus more on hazard communication, occupational health, and compliance management for your business. Sourcing for EH&S management information systems would be an essential step towards enhancing the safety and wellness of your employees.
Reducing Legal Liability
Companies are incurring more costs related to legal liabilities as the business setting becomes more perilous. With such unplanned for expenses, you may end up incurring losses that may drive your firm out of operations.
But with a well-implemented ORM strategy, you can reduce the level of legal liability accruing to your business due to injuries and other work-related hazards.
Save Time and Resources
Dealing with risks can be an uphill task. It’s worse when such uncertainties materialize and find you unprepared to deal with the consequences. You may end up incurring losses and wasting time. But this can be avoided with an effective ORM strategy.
You’ll be able to save on valuable resources such as time and money once you implement an ORM strategy. With an EH&S management information systems, you’ll have a well-laid out action plan as you draft your ORM implementation strategy.
Defining Your ORM Strategy Will Give You the Confidence to Expand Your Business
Your business will never thrive without taking risks. However, even as you hope to expand into new frontiers, you must develop ways of managing internal and external risks.
Have you been wondering, “What is Operational Risk Management?”
Well, this article has provided you all the answers. You only need to consider the use of EH&S management information systems, and you can kiss all your risk management concerns goodbye.
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