Posted on February 19, 2021.
With stringent demands placed upon organizations from regulatory bodies and ever-changing legislation to contend with, a robust operational risk framework provides a basis from which an organization can ensure ‘operational risk exposures are kept within appetite, compliance is maintained and that internal policies and procedures for the management of operational risk are adhered to.’ So states the Institute of Risk (IOR) in its ‘Operational Risk Governance’ white paper, part of a series of guidance designed to help risk professionals improve the practice of operational risk management.
Operational risk governance is considered essential to good management. It enables senior personnel to shape and roll-out an operational risk strategy that meets business objectives and satisfies all stakeholders, whilst monitoring its efficacy.
Written with a wide range of organizations and sectors in mind, ‘Operational Risk Governance’ explains how effective governance improves operational risk management and reporting, the end result being better decision-making and optimized business performance.
With a robust operational risk management infrastructure and best practice risk governance activities undertaken, a business can expect to enjoy direct benefits. For instance, ‘the proper analysis of operational risk exposures and events should lead to fewer losses and near misses, reducing costs and enhancing efficiency.’
The guidance covers all areas of operational risk governance that should be considered, including:
Jenny Ritson-Smith of Sword GRC comments, “The white paper guidance provides risk personnel with insights to establishing a successful governance structure for operational risk within their organization and the value-add that can stem from it.
“The suggestion is that operational risk management and governance are closely linked. According to the IOR guidance, it wouldn’t be possible to have an embedded operational risk management framework without effective corporate governance arrangements. By the same score, effective corporate governance arrangements depend on an operational risk management framework being embedded.
“There are separate white papers in the series dedicated to embedding operational risk and risk appetite and tolerance – well worth a read.”