Staying Ahead of the Curve: Top Trends in Operational Risk Management

Introduction

In today’s fast-paced and interconnected business environment, companies are facing an increasingly complex risk landscape. One of the most critical risks that organizations need to manage is operational risk, which can have a significant impact on their reputation, financial performance, and sustainability. Operational risk management is an essential aspect of any organization’s overall risk management strategy, and it is crucial to stay ahead of the curve when it comes to industry trends. In this blog post, we will explore the top trends in operational risk management and what they mean for businesses.

According to a survey by the Institute of Operational Risk, 71% of organizations consider operational risk to be a major concern, and 61% believe that the risk landscape is becoming more complex. (1) This highlights the need for effective operational risk management strategies that can help companies mitigate and manage these risks.

Trend 1: Integration of Operational Risk Management with Enterprise Risk Management

One of the key trends in operational risk management is the integration of operational risk management with enterprise risk management (ERM). This involves embedding operational risk management into the overall ERM framework, ensuring that operational risks are identified, assessed, and managed in a holistic and integrated manner.

Research by the Global Association of Risk Professionals found that 75% of organizations that have integrated operational risk management with ERM have seen improvements in their risk management capabilities. (2) This highlights the importance of integrating operational risk management with ERM to ensure that operational risks are managed effectively.

Trend 2: Use of Advanced Technologies in Operational Risk Management

Another trend in operational risk management is the use of advanced technologies, such as artificial intelligence (AI), machine learning (ML), and data analytics. These technologies can help companies identify, assess, and manage operational risks more effectively, and can also provide valuable insights into risk management.

A report by Accenture found that 80% of organizations are using or planning to use AI and ML in their risk management practices, including operational risk management. (3) This highlights the increasing importance of technology in operational risk management.

Trend 3: Increased Focus on Third-Party Risk Management

Third-party risk management is another area that is gaining increasing attention in operational risk management. With the growing use of outsourcing and third-party vendors, companies are facing increased risks from third-party relationships.

A survey by Deloitte found that 65% of organizations consider third-party risk to be a major concern, and 55% believe that third-party risk is becoming more complex. (4) This highlights the need for effective third-party risk management strategies that can help companies mitigate these risks.

Trend 4: Growing Importance of Cyber Risk Management

Cyber risk management is another critical trend in operational risk management. With the increasing use of technology and the internet, companies are facing growing risks from cyber-attacks and data breaches.

A report by IBM found that the average cost of a data breach is $3.86 million, and that 75% of organizations are not adequately prepared to respond to a cyber-attack. (5) This highlights the need for effective cyber risk management strategies that can help companies protect themselves against cyber threats.

Conclusion

Operational risk management is a critical aspect of any organization’s overall risk management strategy, and it is essential to stay ahead of the curve when it comes to industry trends. In this blog post, we have explored the top trends in operational risk management, including the integration of operational risk management with ERM, the use of advanced technologies, increased focus on third-party risk management, and growing importance of cyber risk management.

We would love to hear from you! What do you think are the most critical trends in operational risk management? How are you staying ahead of the curve in managing operational risks? Leave a comment below and let’s start a conversation.

References:

(1) Institute of Operational Risk. (2020). Operational Risk Survey.

(2) Global Association of Risk Professionals. (2019). Enterprise Risk Management Survey.

(3) Accenture. (2020). Artificial Intelligence in Risk Management.

(4) Deloitte. (2020). Third-Party Risk Survey.

(5) IBM. (2020). Cost of a Data Breach Report.