Operational Risk Assessments can go haywire because of a number of reasons. And here are a few things you need to set right to eliminate the causes behind failed risk assessments:
Building the right risk culture
A standard risk language has to be created
This common understanding and uniform language also facilitates smooth communication among internal departments and risk practitioners.
There should be a common understanding of risks. Only then will it be possible to sum up risks, differentiate risk exposures and evaluate control measures.
Risks should be communicated precisely and everyone should be on the same page when talking about risks.
Senior management has an important role to play in every aspect of operational risk management. They should proactively use risk management tools and be an integral part of the risk assessment workshops. It builds employee confidence in the risk assessment process.
The policies are easy to put on paper, but implementing them in different branches in varied regions and cultures across the world is a behemoth task.
As a risk manager one should be aware of the relevant cultural factors and take them into consideration when setting up and executing risk assessment programs.
Incomplete communication and documentation
There has to be complete transparency in the risk assessment process, and the only way to achieve this is by communicating. Employees and stakeholders should be put in proximity of relevant and complete information. So that the thesis, rationale, results, relevance and drawbacks of risk assessment are overtly visible to all.
Sometimes it might be futile data (thought to be insignificant for the group) that backfire and cause risk assessment to collapse.
Documentation and communication go hand in hand. It is another integral part of risk assessment. Proper documentation will result in good reporting and vice versa.
Hence, documentation has to be all-inclusive and elaborate.
Reviewing and improving risk assessment
There is always scope for improvement in your risk assessment strategies and processes.
To learn what can be improved, firstly analyse the current risk assessment methods and results. Have the assessment reports published and then have a word with your employees. You will clearly know the inefficiency of the techniques or if it needs amendments.
Moreover, an organization expands every now and then. It might not be a buzzing growth. A few additions like new resources, tools, products or services can also make a difference. So ensure that you conduct risk assessment reviews periodically.
It is important to take the following points into consideration when conducting Risk Assessment reviews:
Is there scope for improvement in the risk assessment process?
Have you been looking into negative feedbacks from the staff?
Has the organization undergone any changes?
What have you inferred from actual losses or near misses?
Risk assessment shouldn’t be just an annual file on the table. It is part of the daily and ongoing process that is summated and printed onto the annual report. The basics of operational risk assessment require a clear understanding before structuring and enforcing it.
Latest posts by Mohammed Nasser Barakat (see all)
- The Seven Operational Risk Event Types Projected by Basel II - December 15, 2014
- Overseas Businesses Endangered by Political Risks - November 20, 2014
- Reputational Risks Arising out of Social Media - November 5, 2014