OPRATIONAL RISK || TRAINER ANIL MAURYA

OPRATIONAL RISK || TRAINER ANIL MAURYA 
Objective
To learn about the operational risk   
Key Learnings 

1. Concept of Operational Risk

A company/business has a threat of operational risk when its procedures are held up due to any of the given below reasons:

a. Problem in system

b. Failure of Standard Operating Procedures (SOPs)

c. Mistakes or fraud done by employees

d. Criminal conspiracy in business

The probability of loss due to the above-mentioned hindrances is known as operational risk.

2. Factors of Operational Risks

a. Employees: Overworked employees or improperly trained employees are the first reason for the operational risk of a company/business because such employees:

Follow the wrong business process
Do work with lethargy
Are unaware of business processes
 b. Macro environment: The elements of the macro environment of a business are:

Society (Socio-environment)
Political environment
Economic environment
Legal environment
Technological environment
Government
 The changes in the business environment are included in operational risk.

Operational risk management of a business defines how much a business can modify its system as per the volatility, changes, and fluctuations in its business environment.

c. Unexpected risk: The various unexpected risks which can cause operational risk in a business are:

Natural disaster
Fire
Technical problems
People (HR-related issues)
Power cut
Admin-related issues
Some examples of unexpected risks are earthquake in Bhuj or Nepal, Tsunami, fire outbreak, power cut due to Grid Failure, and lockdown due to COVID-19.

Maximum businesses were not prepared for the disruptions caused due to the COVID-19 lockdown. The outcome of managing this operational risk is that many businesses have now mandated work from home for their employees.

3. Impact of Operational Risk on Business

Operational risks adversely impact a business in terms of the following:

a. Money: Operational risks cause discontinuity and revenue loss in the business operations by disrupting business processes. 

b. Time: Due to the impact of operational risk, businesses are not able to utilise this time to generate revenue.

c. Reputation: A business has to face reputation risk when the following news about the business goes into the market:

Business loss
Failure to capitalise on opportunities
Unbearable competition
Using reserves to meet day-to-day expenses
4. Mitigation of Operational Risk

Do the following to address or mitigate business operational risk:  

a. Training: A business/company should manage operational risks by providing the following to its employees:

Regular training
Formal training
Mock drills
b. Business Continuity Plan (BCP): A Business Continuity Plan is a system that safeguards a business against:

Potential threats
Disruptions
A BCP defines steps to safeguard assets and employees of a company/business.

A Business Continuity Plan is very different from a Business Recovery Plan because it defines that how a business can operate during operational hindrances. 

For example, the entire data of finance company XYZ Pvt. Ltd. is on computers of employees. If the company plans BCP and has a backup system enabled along with data on the cloud, then employees can access the data from anywhere and they will be able to perform their duties even if a natural calamity happens.

Key Outcomes of the Video

Create Business Continuity Plan to manage operational risk on business
Analyse factors of operational risk to manage the business operational risk
Focus on training to manage business operational risk      

Comments

Post a Comment

Popular posts from this blog

ECONOMIC RISK MANAGEMENT

ECONOMIC RISK MANAGEMENT  To learn how to manage economic risks  Key Learnings from the Video 1. Economic Risk  The economic/investment risks occur due to changes in business conditions or government policies and this is called economic risk. There are two types of economic risk: i. Macroeconomic Risk  This refers to the risk arising due to global economic changes such as economic policy changes by the US, UK, etc.  This type of risk occurs due to the factors that are outside the control of a country and impact your business operations in that country. ii. Microeconomic risk  This refers to the actions/events in your country that affect your business operations.  For example, if you are in steel trading business, then fluctuation in the price of the steel is a microeconomic risk. This type of risk affects the foreign operations of your company. Economic risks can "suddenly make your business unsustainable." For example, Jet Airways' business was advers...
Read more

Concept of Reputation Risk Management || Trainer Anil Maurya

Objective To learn about the reputation risk    Key Learnings from the Video 1. Concept of Reputation Risk The loss of a business/brand’s reputation is known as reputation/reputational risk. The following are the consequences when the brand name of a business gets spoiled: Decreased sales Declined market share Reduction in the social capital (Value of brand on social media platforms) Reputation risk causes loss to business from all aspects. Businesses have to struggle for a long time to gain the lost reputation. For example, a few years back Maggi lost its reputation and was even banned and was away from the market for a long time. The reputation loss also caused loss to its parent company Nestle and also created a challenge for its future in the country, and this resulted into changes in the top management of Maggi. 2. Reasons of Reputation Risk a. Product Failure It means the product is not up to the mark as per customers’ expectations or the commitments which you made while...
Read more

Liquidity Risk Management

Objective of the E-BOOK  To learn about the stock market risk    Key Learnings from the Video 1. Meaning of Stock Market Risk The term investment itself means risk because the return on investment is always a thing of concern. When an investor is investing in the Stock Market he/she taking a risk as an investment in the shares of the company may not mean high returns, this can also lead to a loss. 2. Types of Risks The various types of risks are: a. Systematic risk Systematic risk is the risk that arises due to the fluctuations in the stock market of the country in which you are investing is known as systematic risk. For example, if an investor is investing in the Indian stock market, then his/her investment can be at risk according to the movement/fluctuations in the stock market (like National Stock Exchange, Bombay Stock Exchange, etc.). Systematic risk cannot be covered because it is caused due to a particular system which is in place.  The various situations whi...
Read more