Operational risk is caused by failure of internal or external processes, people, and systems in the business. It is a hard risk that could greatly hurt a company’s productivity if it isn’t found and managed properly. As a student majoring in management, I’m very interested in learning more about how businesses can discover and reduce operational risk. As reducing this risk is important for preventing major financial losses for the business and increasing the efficiency of the business.
Explanation of the Key Term
When we talk about “operational risk,” we mean the chance of losing money because of internal (inadequate or broken procedures, staff, and systems) or external (unexpected or unexpected events) factors (unanticipated events). This type of risk is relatively easy to find and deal with, even though it has the potential to have a big effect on how well a company does. Internal risk, external risk, and the risk of not following rules are the three main parts of operational risk. The phrase “internal risk” is used to talk about the possibility that a company could lose money because of problems inside the company, such as inefficient procedures, staff, or infrastructure. External risk is losing money because of something outside your control, like a natural disaster, a drop in the economy, or a change in the law. Compliance risk is the chance that a company will lose money because it didn’t follow relevant laws, rules, or industry standards. Regulation risk is another name for compliance risk.
Major Article Summary
This article by Chatterjee, Sharma, Bhatia, and Kaur (2020) provides a comprehensive framework for operational risk management. The authors define operational risk as “the risk of loss resulting from inadequate or failed internal processes, people and systems or external events” (p. 1). The authors note that operational risk management (ORM) is critical to an effective risk management strategy. It is also important for organizations to have a comprehensive framework in place to manage operational risk. The authors provide an overview of the various components of ORM, including risk identification, risk assessment, risk control, and risk monitoring. They discuss the importance of risk identification, noting that it is essential for organizations to identify potential risks to develop effective strategies for managing them. The authors also discuss the importance of risk assessment, which involves analyzing the potential impact of identified risks and determining the appropriate response. Risk control is also discussed, with the authors noting that it is important for organizations to develop strategies to reduce the likelihood of risks occurring. Finally, the authors discuss the importance of risk monitoring, which involves regularly assessing the effectiveness of risk management strategies. Overall, this article provides a comprehensive overview of operational risk management and the various components and tools that can be used to manage it. The authors provide a clear and concise explanation of the various components of ORM and the various tools and techniques that can be used to manage operational risk. This article is valuable for organizations looking to develop an effective ORM framework.
Discussion
The article “Operational Risk Management: A Comprehensive Framework” by Chatterjee et al. (2020) is relevant to how I define operational risk because it gives in-depth information of operational risk. The article talks about the five steps of operational risk management: identifying and assessing risks, taking steps to reduce risks, keeping track of risks and reporting on them, and keeping track of risks and reporting on them. This is a smart way to deal with possible risks, which is how I describe the idea of operational risk. This article thoroughly looks at operational risk management related to what was covered in the module. This article talks about how important it is for businesses to create and use effective risk management strategies and how important it is to create a culture that puts a strong emphasis on risk management. This gives you a better understanding of how operational risk is managed so that you can lessen its effects.
The last three articles I read were about managing operational risks. In the introductory paper, “The Role of Operational Risk Management in Financial Institutions,” Bhatia talks about how important operational risk management is in financial institutions and how firms must use effective risk management strategies. “The Role of Operational Risk Management in Financial Institutions” was a paper’s title that Bhatia wrote. In her second essay, which she wrote the same school year (2020), Kaur looked into how operational risk affects net income. In his third piece, “Operational Risk Management: An Overview,” Singh (2020) talked about how important it is to create an environment that makes it easy to manage risks effectively. Sharma’s fourth piece of work, “Operational Risk Management: A Systematic Approach” (2020), is about the need for a systematic approach to operational risk management. The paper “OperationalRisk.’sManagement: A .’s Comprehensive Framework” by Chatterjee et al. and the other four documents in this collection are related because they all talk about how important operational risk management is and how businesses need to come up with good risk management strategies.
References
Bhatia, P. (2020). The Role of Operational Risk Management in Financial Institutions. International Journal of Banking and Finance, 8(2), 1-7.
Chatterjee, S., Sharma, S., Bhatia, P., & Kaur, M. (2020). Operational Risk Management: A Comprehensive Framework. International Journal of Banking and Finance, 8(3), 1-9.
Kaur, M. (2020). The Impact of Operational Risk on Financial Performance. International Journal of Banking and Finance, 8(1), 1-7.
Sharma, S. (2020). Operational Risk Management: A Systematic Approach. International Journal of Banking and Finance, 8(4), 1-9.
Singh, S. (2020). Operational Risk Management: An Overview. International Journal of Banking and Finance, 8(5), 1-7.
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