What Is an Operational Risk Management Framework?
An Operational Risk Management (ORM) Framework is a structured system that organizations use to identify, assess, control, monitor, and mitigate risks arising from internal processes, people, systems, or external events. These risks can disrupt operations, cause financial losses, damage reputation, or lead to regulatory non-compliance. A strong ORM framework helps organizations operate smoothly while remaining resilient in an uncertain business environment. Understanding Operational Risk Operational risk refers to losses resulting from failed internal processes, human errors, system breakdowns, fraud, cyber incidents, or external disruptions such as natural disasters. Unlike market or credit risk, operational risk exists across every department and activity within an organization. Because these risks are embedded in daily operations, they require continuous oversight and structured management. Core Elements of an Operational Risk Management Framework 1. Risk Identification Risk identif...