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Implementing An Effective Operational Risk Management (ORM) Process

21 Jul

Operational Risk Management (ORM) is centered on the assurance that any and all hazards that are associated with business activities are properly identified and understood, that the associated risks are formally assessed and quantified, and that there is a structured process in place for the enactment of the decisions that are made by leadership functions to manage hazards and the associated risks.

ORM is a vital business process, and it is crucial that a common, consistent, and systematic approach is used throughout.  It shall serve to provide direction for making decisions and taking actions for managing operational risks, in the determination of the level of risk exposure associated with plant operations and ultimately in the implementation of the necessary mitigations or controls to manage risk.


By following a four-step model of ORM shown below, you can enhance your decision making, optimise your resources, and create a culture of risk awareness and accountability:

  1. Establish Context: This involves defining the scope, objectives, and boundaries of your ORM process. You need to understand your internal and external environment, your stakeholders’ expectations, and your risk appetite and tolerance.

  2. Risk Assessment: It’s important to understand that no risk operates in isolation, so understanding the relationship between the risk and potential impact onto other parts of organization is essential. This involves identifying the potential sources of operational risk, analysing their likelihood and impact, and evaluating their level of risk. You need to use various tools and techniques, such as risk registers, risk matrices, risk heat maps, and scenario analysis.

  3. Risk Treatment: The selection and implementation of the most appropriate risk response strategies, addressing the underling root cause of the risk, and does not avoid, transfer, or acceptance the risk. You need to consider the cost-benefit analysis, the feasibility, and the effectiveness of each option.

  4. Monitor and Review: This involves tracking the progress and performance of your ORM process, reviewing the effectiveness of your risk controls, and updating your risk information. You need to use various metrics and indicators, such as key risk indicators (KRIs), key performance indicators (KPIs), and loss data.

By following these four steps of ORM, you can manage your operational risks more proactively and efficiently. You can also gain a competitive advantage by delivering better products and services, enhancing your brand reputation, and achieving sustainable financial results. However, it is important to note that ORM is not a one-time activity but a continuous cycle that requires regular review and improvement.

AIE understands the value in having an effective ORM process in place, and our specialists can support you in implementing a programme to minimise risk and maximise your plant’s potential. We also offer a 1-day online training course which is aimed to illustrate the function of a mature ORM system and its role in safeguarding assets, people and the environment.

To learn more about our services, contact us at info@aiegroup.org

To learn more about our training course, click here.

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