Introduction to Operational Risk Management ORM

Define risk as the possibility that an action or event yields adverse impact and observe how risk becomes a real-world outcome. Emphasize risk awareness and management to anticipate losses.

Explain how an event initiates a risk and, if realized, produces adverse impacts like loss of sales and profitability, with examples of lockdown and financial statement risk.

Explore the types of risk faced by institutions, including market, liquidity, operational risks, compliance risks, and credit risks, and how the enterprise risk management model covers them.

Explore market risk, compliance risk, credit risk, and liquidity risk within enterprise risk management, and how price movements, regulations, debtor defaults, and liquidity gaps impact balance sheets and earnings.

Identify and categorize risks, measure exposure, and implement controls in operational risk management, with capital planning, ongoing monitoring, and regular reporting to senior management and the board.

Define governance, risk culture, and risk appetite; outline the three lines of defense and how first, second, and third lines, plus internal audit, manage operational risk.

Define operational risk as the potential loss from inadequate internal processes, information systems, internal controls, and people, and show how failures in these areas trigger operational losses and disruptions.

Explore operational risk event types, including internal fraud and embezzlement, weak controls, unsafe work environments, customer attrition, staff turnover, supplier issues, and system or asset losses.

Explore operational risk management objectives, including identifying and assessing risks, measuring exposure, allocating capital, and monitoring losses to prevent avoidable costs and fraud.

Examine how banks, investment banks, insurance companies, airlines, and oil and gas firms face operational risk from complex operations, large customer base, and heavy regulation, requiring effective risk management.

Map the board of directors, senior management, and middle management as governance levels that set policies, internal controls, and ensure compliance with laws and regulations, reporting to shareholders.

Differentiate front offices from back offices in an institution by outlining direct customer-facing activities, sales and investments versus back-office functions like finance, IT, compliance, risk management, and HR.

Define and enforce a strong operational risk culture through board of directors policies and senior management, aligning risk appetite with complexity, controls, and regulatory expectations to safeguard assets and continuity.

Learn how the operational risk management framework is developed and governed by senior management and the board. Explore roles, risk appetite and tolerance, reporting, data collection, risk assessment, and governance.

The operational risk management team analyzes risk profiles with an automated system, collects loss data, and produces reports to guide management and board decisions on controls and mitigation.

Learn how ORM uses risk indicators, scenario analysis, and internal loss data to identify, assess, and quantify operational risk and its financial impact for management and board.

Utilize the RCSA self-assessment to identify operational risks, map controls, and reveal deficiencies, then create time-bound plans to strengthen controls in the finance function.

Learn how key risk indicators (KRIs) use risk and control self-assessment data and audit findings to signal HR operational risks, monitor exposures, and drive root-cause analysis and corrective actions.

Internal audit functions as the third line of defense for operational risk management, validating effectiveness and reporting findings to the board audit committee.

Take a practical knowledge test on risk concepts, operational risk, ORM objectives, risk appetite, and typical loss events like embezzlement and employee fraud.

Understand operational risk as loss from inadequate processes, systems, controls, and people. Explore examples like employee fraud and unsafe workplaces, and how risk management identifies and monitors these risks.