Does Your Operational Risk Management Need a Fresh Perspective?

Operational risk management (ORM) has come a long way, but the challenges of today’s fast-paced and ever-evolving business environment demand more than the traditional “box-ticking” approach. Businesses are facing a whirlwind of changes—whether it’s disruptive competitors, new regulations, or shifting customer demands—and ORM must rise to the occasion.

This article is inspired by the insightful work of Michael Rasmussen, a leading thought leader in governance, risk, and compliance (GRC). Michael’s ideas on Agile Operational Risk Management (AORM), which focus on building 360-degree contextual awareness and creating an adaptable risk architecture, deeply resonate with me. His work has shaped how I think about ORM and how it can empower organizations to thrive in uncertainty.

Let’s explore how you can implement Agile Operational Risk Management and ensure your ORM framework is not only effective but also a true enabler of strategic success.

1. Awareness: Understand Your Risk Landscape

The foundation of any strong ORM framework is understanding your risks holistically. Risks today are interconnected—operational risks often trigger or compound strategic, financial, or reputational risks. Michael Rasmussen emphasizes the importance of achieving 360-degree awareness, where risks are understood in their broader organizational and market context.

Key Actions:

• Create a Risk Map: Develop a strategy map and value chain to connect organizational objectives to potential risks. This provides a clear picture of where risks originate and how they interact.
• Leverage Technology: Use dashboards, predictive analytics, and AI-powered tools to continuously monitor emerging risks and provide real-time insights.

Achieving awareness isn’t just about identifying risks—it’s about understanding how they impact your organization’s overall goals and strategy.

2. Alignment: Break Down Silos

One of the key challenges in ORM is fragmentation. Risk management functions often operate in silos, making it difficult to achieve a unified understanding of risks. Rasmussen’s work highlights the importance of aligning risk management efforts across departments to ensure consistency and efficiency.

Key Actions:

• Form a Risk Committee: Establish a cross-functional group with representatives from IT, Compliance, Legal, HR, and other key functions. This promotes collaboration and a shared understanding of risk priorities.
• Use a Common Framework: Implement a unified risk taxonomy and standardized assessment criteria. This ensures risks are managed consistently, even if individual departments use specialized tools.

Breaking down silos fosters collaboration, improves decision-making, and ensures that all parts of the organization are working toward common risk management goals.

3. Responsiveness: Act Quickly and Effectively

In today’s volatile environment, waiting for the quarterly risk review is no longer an option. Organizations must be equipped to respond swiftly and decisively to emerging risks and incidents.

Key Actions:

• Develop Incident Response Playbooks: Clear, pre-defined processes for handling risk events ensure quick and coordinated responses.
• Monitor in Real-Time: Use tools that provide early warnings for potential risks, allowing your team to take action before issues escalate.

Michael Rasmussen’s approach emphasizes the importance of agility in ORM, where responsiveness becomes a core strength of the organization.

4. Agility: Adapt to Change

Agility is central to Rasmussen’s philosophy. Businesses must be able to pivot and adapt as new risks emerge or circumstances change. This requires frameworks that are flexible and future-proof.

Key Actions:

• Prepare for Regulatory Changes: Stay ahead of evolving regulations like ESG requirements, DORA, or digital resilience mandates.
• Build Modular Frameworks: Create risk frameworks that can scale or adapt based on organizational growth or external changes.

Agility ensures that your ORM framework remains relevant and effective, even in dynamic environments.

5. Resilience: Prepare for the Unexpected

One of the most compelling aspects of Rasmussen’s work is his focus on operational resilience. It’s not just about avoiding risks but also about being able to recover quickly when disruptions occur.

Key Actions:

• Conduct Stress Testing: Regularly test your organization’s ability to handle extreme scenarios, such as cyberattacks or supply chain disruptions.
• Assess Third-Party Resilience: Ensure that vendors and suppliers have robust risk management practices, as their vulnerabilities can directly impact your operations.

Resilience is a critical outcome of Agile Operational Risk Management and is essential for long-term success.

6. Efficiency: Optimize Resources

Rasmussen’s approach to ORM is not about creating burdensome processes. Instead, it’s about making ORM an enabler of efficiency and effectiveness.

Key Actions:

• Automate Routine Tasks: Leverage AI and RPA to handle repetitive tasks like data collection and reporting, freeing up resources for strategic initiatives.
• Track and Measure Impact: Demonstrate the value of ORM by measuring outcomes like incident reduction, cost savings, and compliance improvements.

Efficiency ensures that ORM is not seen as a drain on resources but as a strategic asset.

Final Thoughts

Michael Rasmussen’s work has been instrumental in shaping how I view the future of operational risk management. His emphasis on awareness, alignment, responsiveness, agility, resilience, and efficiency forms the cornerstone of Agile Operational Risk Management. These principles are not just theoretical—they are practical steps that any organization, regardless of size, can implement to enhance its ORM practices.

If you’re rethinking your ORM framework, take inspiration from these ideas and start small. Build awareness, foster alignment, and focus on being responsive to risks. Over time, you’ll create a robust and agile system that doesn’t just mitigate risks but also drives organizational success.

Operational risk management isn’t just about avoiding disasters—it’s about ensuring your organization is prepared to adapt, compete, and thrive in an unpredictable world. Let’s work together to make ORM a competitive advantage. Many thanks to Michael Rasmussen for his thought leadership in this critical area!