Business Benefits: Moving Beyond Compliance
As ORM efforts mature, and gain both the support and the confidence of management, they are becoming increasingly valuable to the business. Perceived initially to support regulatory requirements, these efforts can be leveraged and aligned with business performance management. To be successful, however, such alignment must be based on a clear vision of the potential benefits. Few of the benefits are discussed below:
- Identified and assessed key operational risk exposures: ORM enables an organization to identify measure, monitor and control its inherent risk exposures of the business at all levels. Elements like Risk Assessment, Event Management, and Key Risk Indicator play an important role; enabling the organization to evaluate the risk controls, based on the identified inherent risk, and to measure the residual risk which remains after the implementation of controls.
- Clarified personal accountabilities, roles and responsibilities for managing operational risks: Clear cut specification of roles and responsibilities of personnel regarding risk profile is an imperative part of implementing an integrated ORM framework. It not only streamlines the risk management process, but also allows risk managers to better incorporate accountability into the work culture of the organization.
- Evolved and enabled efficient allocation of operational risk capital: With streamlined risk management process, efficient allocation and utilization of operational risk capital can be ensured.
- Consistent and timely operational risk management information and reporting capabilities: Through the development of a well-tailored risk management strategy, a robust ORM system supports features like role-based dashboards, control diagrams and scorecards that provide visibility into the ongoing risk management efforts and bring high-risk areas into focus.
- Sustained risk-smart workforce and environment: Application of an ORM framework, in conjunction with related risk management activities, will support a cultural shift to a risk-smart workforce and environment in the organization. An essential element of a risk-smart environment is that it ensures that the organization has the capacity and tools to be innovative while recognizing and respecting the need to be prudent in protecting its interest.
- Ensured continuous risk management learning: Most business units today acknowledge that continuous learning is fundamental to more informed and proactive decision-making; and a successful learning organization must align itself to the businesses it supports. To ensure continuous risk management learning, these business units are sharing their experience and best risk management practices – internally and across organizations. This supports innovation, capacity building and continuous improvement, and fosters an environment that motivates people to learn.
However, successfully navigating the road from compliance to value creation can be daunting without a roadmap and a clear vision. By taking a holistic approach to ORM an organization can significantly lower its risk profile and improve responsiveness to risk scenarios leading to strategic and operational benefits.