Understanding an organization’s operational risk is paramount to its ability to create a robust security posture. Security teams must understand the ins and outs of their business operations to identify what will or won’t impact everyday activities.
From failed internal processes to human error, many factors can impact today’s digitally connected workplace. Therefore, leaders need to take operational risk management (ORM) seriously and give security teams the support and resources required to create a comprehensive operational risk management strategy. Without due diligence, negative outcomes may include financial losses, reputational damage, regulatory penalties, business disruption, and competitive disadvantages.
Moving Past Traditional ORM Process to Embrace Modern Innovations
Traditional risk management practices were sufficient a decade ago, but today’s complex business landscape requires a proactive, optimized approach. Technologies such as Artificial Intelligence (AI), Machine Learning (ML), and Natural Language Processing (NLP) are instrumental in aiding security teams in the creation of a comprehensive operational risk management program that can better manage risk in a rapidly changing world.
In addition, augmented analytic tools, such as those spearheaded by Seerist, offer a new paradigm for risk analysis. Some of the unique benefits Seerist offers include automated tools, real-time alerts designed to hyper-focus on a company’s unique needs, interactive dashboards to better understand potential and emerging risks, insights from on-the-ground experts who can offer insider knowledge and context, and much more.
Organizations need to look beyond traditional methods to remain competitive in today’s threat landscape and avoid unnecessary risk that could jeopardize long-term success.
What Exactly Does ORM Entail Anyway?
A typical ORM framework will include the following five phases: risk identification, assessment, mitigation, monitoring, and reporting.
Identification
This is when a security team determines potential risks specific to their business. They’ll want to assess all risks and threats that can harm their business objectives and operations. Steps teams should take during this phase include reviewing internal controls, analyzing operational risk data, and speaking to leaders involved in day-to-day functions – from IT to HR to manufacturing – to pinpoint vulnerabilities. They’ll want to review historical data and prior issues to determine what is likely to occur again and walk through a variety of hypothetical situations to illuminate pitfalls that have not yet come to fruition.
Assessment
During assessment, teams review potential risks and determine their likelihood and severity. This information becomes the basis for their mitigation plan. Teams will assess each risk to determine if it’s worthwhile to spend time and money to circumvent it. In some cases, a risk can be so minor, or so unlikely to occur, that it’s not worth the team’s time to create a mitigation tactic for it. Both qualitative and quantitative methods may be employed, often using key risk indicators to evaluate exposure levels.
Mitigation
While in the mitigation phase, security teams plan how to best avoid or reduce identified risks. This may include rolling out new software, implementing risk controls, or improving workflows. The goal during this phase is to address the most detrimental risks and work with intention to circumvent them – keeping the company out of danger entirely and preventing potential operational failures.
Monitoring
ORM is not a “one and done” activity. Just the opposite – it’s an ongoing task. As internal processes shift, new leaders are hired, and new technologies are introduced, different operational threats may emerge. Teams must continually reassess their risks and leverage technology platforms to flag early warnings. They need to schedule regular reviews of plans and meet with senior management to ensure everyone is unified and adapting to evolving business practices.
Reporting
Security teams must also invest in reporting findings back to leadership and stakeholders at large. From providing an overview of completed work to sharing insight on new threats to the organization or the industry, reports are a valuable way to align enterprise risk management with organizational goals. It is often beneficial for teams to leverage the reporting capabilities of a third-party platform to share insights clearly and consistently.
Managing Operational Risk Management: Five Pitfalls to Avoid
Throughout the above phases, five challenges are most commonplace.
1. Data Overload and Silos
It is impossible for teams to manually monitor and sort the vast amount of disparate data being circulated today. It is also increasingly difficult for them to synthesize it to identify common threads and trends. By automating this work, teams remove the barrier of manual data collection and analysis, enabling more streamlined risk controls and improved visibility across departments.
2. Reactive vs. Proactive Mindset
A second common challenge is the shift from a reactive to a proactive mindset. Traditional methods are reactive, where a team addresses risks after they arise. Modern approaches take proactive steps to stay ahead of issues by conducting robust assessments of potential threats, identifying which ones are wide-reaching and which are most catastrophic. This mindset helps prevent problems triggered by external events that might otherwise go undetected.
3. Subjectivity and Bias
Another roadblock related to ORM is subjectivity and bias. Teams relying solely on manual analysis and expert opinion tend to face large gaps in time and intelligence. Analysts simply cannot adequately monitor all information being shared today (see the first challenge of data overload), and without technologies that can sort, parse, and identify trends within minutes, teams simply can’t keep up. While leveraging information from experts is essential, vetted data is imperative to turn subjective insights into objective analysis and support long-term risk management initiatives.
4. Lack of Real-Time Insights
The absence of real-time data can also be a challenge. Traditional, manual work leads to significant lag times for analysts to review and collate information. Technology eliminates this issue by enabling teams to respond quickly, in real time, to emerging threats. This proactive visibility helps mitigate compliance risk, ensures decisions are based on accurate information, and reduces the potential impact on operations.
5. Inefficient Resource Allocation
The final challenge most often associated with ORM is inefficient resource allocation. This happens when leaders do not have a solid understanding of the negative impact operational risks pose or they simply do not understand overall priorities. With better automation, integrated analytics, and unified collaboration, organizations can better allocate personnel and resources toward the areas most likely to impact performance.
The Pillars of Effective Operational Risk Management
The following pillars provide a framework to help leaders and teams tackle the often-overwhelming concept of ORM. These guidelines are made attainable when teams leverage advanced risk platforms and automated systems. What may have been difficult to achieve in a manual environment is now possible thanks to optimized, tech-driven strategies that enhance business practices and organizational agility.
Proactive Identification and Foresight
As noted in the Identification ORM phase, teams should always review historical data. However, they can’t stop there. They need to move beyond historical data and adopt a proactive mindset. Avoiding a problem is always better than trying to fix it once it exists, particularly when it can disrupt critical operational risk program performance.
Data-Driven Decision Making
The amount of information available to security teams today is endless. It is exceedingly important for organizations to invest in tools that reduce the time teams spend doing tedious, but essential tasks, such as ones that machines can do in mere seconds. When leaders are equipped with accurate, real-time data, they can make smarter, faster decisions that minimize operational risk management program vulnerabilities.
Continuous Monitoring and Adaptability
Strategies and tactics must be re-evaluated regularly to ensure they align with the current risks and threats. Teams who can establish agile systems capable of adapting to dynamic risk landscapes will find the most success. This flexibility is a hallmark of resilient organizations that consistently reassess their risk management practices.
Enhanced Collaboration and Communication
Operational risks don’t impact just one part of the business, they often ripple across departments. Leaders who prioritize breaking down silos and maintaining unified communication with executives and front-line teams alike will achieve stronger alignment and better long-term resilience.
The Role of Augmented Analytics (AI/ML) in Optimization & ORM Success
Security teams do not need to tackle ORM unassisted. Technology innovations such as AI and ML make it possible for security teams to overcome the shortcomings of traditional methods, which centered around manual tactics. The standout benefits of augmented analytics as it pertains to ORM include:
- Automated Data Collection and Analysis: Processing millions of data points rapidly.
- Predictive Capabilities: Identifying emerging threats and potential disruptions before they occur.
- Uncovering Hidden Connections: Revealing subtle risk indicators missed by human analysis.
- Real-Time Situational Awareness: Providing up-to-the-minute insights.
- Reducing Bias and Improving Accuracy: Delivering objective and relevant risk assessments.
By optimizing ORM with the power of augmented analytics, businesses reap many benefits including resilience, strategic advantage, and better decision-making. Seerist, a risk intelligence software which offers powerful automated functionality coupled with expert human analysis, may be advantageous for organizations looking to elevate their strategy from reactive to proactive.
When security leaders find the right advanced analytical tools for their business, they can transform their operational risk strategy by strengthening resilience, improving risk mitigation efforts, and enhancing business continuity planning. With real-time insight into risk exposure, teams can use scenario analysis to identify vulnerabilities and prioritize actions for mitigating risks across the organization.
