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The International Organization for Standardizations’ standard ISO 31000 ‘Risk management – Principles and guidelines” defines risk as” effect of uncertainty on objectives”, and risk management as the “coordinated activities to direct and control an organization with regard to risk”.   The standard was design to apply to any type of risk and in any organization.
Operational Risk Management applies these definitions to the operational environment and as such encompasses the mechanisms, tools, policies, procedures, and processes, including management oversight, to identify, monitor, report, and control operational risk.
 
Their standard ISO 14001 “Environmental Management” in section 4.4.6 Operational Control, which is designed to help organizations minimize how their organizations negatively affect the environment, comply with regulations, and continuously improve these activities, calls out organizations to “ identify and plan those operations that are associated with the identified significant environmental aspects consistent with its environmental policy, objectives and targets, in order to ensure that they are carried out under specified conditions.”
    
Blending these two ideas to encompass all areas of risk in an organization leads us to Operational Risk Management.  The coordination of activities to direct and control an organizations risk by identifying and planning those operations that are associated with the identified risks, consistent with the corporations risk policy, objectives, and targets, establishing, implementing and maintaining a documented procedure(s) to control situations in order to mitigate the risk.
It is recognized that all types of risk are important (e.g.  financial, political, market, etc.) , this series of blogs will concentrate on more the management of the risks associated with the physical aspects of manufacturing.
   
These risks can generally be categorized as:
1.      Employment Practices and Work Place Safety
2.      Products and Business Practices
3.      Damage to Physical Assets
4.      Business Disruption and System Failures
5.      Execution, Delivery, and Process Management
When looking at risks within these categories it is important to remember and apply the four overarching principles to operational risk:
 
1.      Accept no unnecessary  risk 
2.      Make risk decisions at the appropriate level
3.      Accept the risk when benefits outweigh the cost
4.      Integrate ORM into operations and planning at all levels[1]
In order to manage risk successfully a framework has to be established. This topic will be further discussed in the following postings.
What guide lines do you follow in managing your risk?
This posting is the fourth of a series of blogs discussing various factors of operational risk management as it pertains to manufacturing organizations. Please feel free to comment and discuss this series.

[1]
Air Force Instruction 90-901 1 April 2000 – Department of the Air Force – United States of America – Command Policy Operational Risk Management
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