ORM Framework – Planning – Process Risk and Assessment Analysis

One part of the framework for Operational Risk Management is planning and planning can be broken down into the following:

In this blog we will discuss the Process Risk Assessment Analysis portion of the planning process

 

Process Risk and Assessment is the process of identification of risks or hazards inherent to a company’s activities and environment.  In general usage risk and hazard are synonyms[1] , in the realm of Operational Risk Management they have different and specific meanings. According to the Canadian Center for Occupational Health and Safety[2]a hazard is defined as the following: any source of potential, damage, harm, or adverse heath effect on something or someone under certain conditions at work. Risk is defined as the chance or probability that a person will be harmed or experience an adverse health effect if exposed to the hazard.  It may also apply to situation with property or equipment loss. To these definitions we can also add including those situations that deal with the environment.

This includes an assessment of the adequacy of the related internal / external controls to determine the residual risk to the organization and the classification of the risks according to their potential impact and likelihood of occurrence. The applications of quantitative and qualitative measures are applied to each area of risk to determine the specific level of risk associated with each hazard identified. This process helps to define the probability and severity of an accident that could result from the hazards based upon the exposure of humans, assets, property, process or the environment to the risk or hazard.