Operational risk management is a vital function within any organization, as it helps to identify and mitigate potential risks that could negatively impact business operations. An operational risk manager plays a critical role in this process, identifying and assessing operational risks and developing strategies to minimize or eliminate them.
In this article, we will take a closer look at the role of an operational risk manager and what it entails, including the responsibilities, qualifications, and key skills needed to be successful in this role.
Operational Risk Manager Duties and Responsibilities
The duties and responsibilities of an operational risk manager typically include the following:
- Identifying and assessing operational risks within the organization, including potential hazards and the likelihood and impact of their occurrence.
- Developing and implementing risk management strategies to mitigate or manage identified operational risks.
- Monitoring and reviewing the effectiveness of risk management controls and making recommendations for improvement.
- Coordinating with other departments and teams within the organization to ensure that risk management considerations are integrated into all aspects of the business.
- Collaborating with senior management to communicate and report on operational risks and risk management activities.
- Advising management on the potential impact of new regulations, legislation, or industry standards on the organization’s operational risks.
- Developing and delivering training programs to raise awareness of the organization’s operational risks and risk management practices.
- Participating in incident response and crisis management activities as necessary.
- Maintaining accurate records of all risk management activities, including risk assessments, action plans, and incident reports.
- Continuously monitoring for any potential emerging risks that could impact the organization and take necessary actions.
It is important to note that specific responsibilities may vary depending on the size and complexity of the organization and the industry in which it operates.
Operational Risk Manager Job Requirements
The job requirements for an operational risk manager typically include the following:
- A bachelor’s degree in a related field such as finance, business, economics, or mathematics.
- A minimum of 5-7 years of experience in risk management, with a strong focus on operational risk management.
- Strong analytical and problem-solving skills, with the ability to identify and assess operational risks and develop effective risk management strategies.
- Excellent communication and interpersonal skills, with the ability to communicate effectively with stakeholders at all levels of the organization.
- Experience in the specific industry sector of the organization, such as banking, insurance, or manufacturing, is a plus.
- Strong understanding of relevant regulations, industry standards, and operational risk management practices.
- Proficiency with risk management software and tools, including data analysis and visualization tools.
- Strong project management skills and the ability to lead cross-functional teams.
- Ability to work under pressure and maintain attention to detail in a fast-paced environment.
- Professional certifications such as COSO, CRMA, etc., can be added advantage.
It’s worth noting that requirements may vary depending on the specific company and the role level. Some organizations may also look for experience in audit, compliance, and governance roles.
Operational Risk Manager Skills
An operational risk manager should possess a combination of both technical and soft skills in order to effectively identify, assess, and manage risks within an organization. Some key skills include:
- Risk identification and assessment: the ability to identify, analyze, and evaluate the likelihood and impact of potential operational risks.
- Risk management: knowledge of and experience with risk management methodologies, frameworks, and techniques to develop effective risk management strategies.
- Analytical skills: the ability to collect and analyze data, identify trends, and make informed decisions based on that data.
- Communication and interpersonal skills: the ability to effectively communicate with stakeholders at all levels of the organization, including senior management and employees.
- Project management: the ability to lead cross-functional teams and manage projects related to risk management.
- Regulatory and industry knowledge: Strong understanding of relevant regulations, industry standards and best practices in operational risk management.
- Technical skills: Knowledge of risk management software and tools, including data analysis and visualization tools.
- Problem-solving and critical thinking: analyzing complex problems and developing innovative solutions.
- Business acumen: understanding of how different areas of the organization function and how they might affect the company’s operational risks.
- Continual learning mindset: willingness to stay up-to-date with new developments in the field of operational risk management and adjust risk management strategies accordingly.
Operational Risk Manager Salary
The salary for an operational risk manager can vary depending on several factors, including the organization’s industry, location, and the level of experience of the individual in the role.
According to data from the US Bureau of Labor Statistics, the median annual salary for risk management professionals, including operational risk managers, is $121,050. However, salaries can range from less than $70,000 to over $200,000 per year, depending on the organization’s size, the role’s complexity, and the level of experience.
In general, larger organizations and those in higher-paying industries, such as finance and banking, tend to offer higher salaries for operational risk managers than smaller organizations or those in lower-paying industries. Additionally, those with a professional certification or advanced degrees in related fields such as finance, business administration, or economics may also command higher salaries.
Salaries for Operational Risk Managers can also vary greatly depending on location. For example, major cities such as New York, London, Singapore, Sydney, etc. tend to offer higher salaries than other areas.
It’s worth noting that these are rough estimates, and your specific salary will depend on your experience, skills, qualifications, location, and the company you are working for. It’s always a good idea to research the specific salary range for operational risk managers in your industry and location to understand better what you can expect to earn.
Operational Risk Manager Work Environment
The work environment for an operational risk manager typically involves a combination of office-based and on-site work. They typically work in an office setting but may be required to travel to various locations within the organization to conduct risk assessments and review processes.
Operational Risk Managers often work closely with different teams and departments, such as finance, audit, compliance, and IT. They may also need to communicate with external parties, such as regulators and industry associations.
Operational risk managers typically work regular business hours. However, they may be required to work extra hours or be on call if an urgent risk-related issue needs to be addressed. They also may be required to be on call during weekends, holidays, and off hours to be available to handle any crisis.
The work environment can be fast-paced and high-pressure, as operational risk managers are responsible for identifying and assessing risks that could significantly impact the organization. They may also be required to make difficult decisions quickly in high-pressure situations.
Overall, Operational risk management is a challenging and rewarding field that allows professionals to have a broad view of the organization and its operations, it also brings a great deal of responsibility, and the work can be demanding. Yet, it provides the opportunity to make a real difference to the organization’s performance and reputation.
Operational Risk Manager Trends
Operational risk management (ORM) is a process used to identify and evaluate potential risks that could negatively impact an organization’s ability to operate effectively and achieve its objectives. ORM has become increasingly important in recent years as organizations have become more complex and globalized and as regulations have become more stringent.
Some of the latest trends in ORM include:
- Greater emphasis on data and technology: ORM is becoming more data-driven, as organizations are using data and technology to identify, measure, and manage operational risks. This includes using big data and machine learning to analyze large amounts of data and identify patterns and trends that could indicate potential risks.
- More focus on third-party risk: Organizations increasingly rely on vendors, partners, and contractors to provide goods and services. This has led to a greater focus on managing the risks associated with these relationships, including the risk of data breaches, fraud, and other types of misconduct.
- Increased regulatory scrutiny: Regulators worldwide impose stricter operational risk management regulations. This includes more frequent audits and inspections and greater fines for non-compliance. Organizations are having to invest more resources in order to meet these regulatory requirements.
- Greater focus on culture and governance: There is a growing recognition that cultural and governance issues within an organization can cause operational risks. ORM is therefore being integrated into overall culture and governance strategies, including establishing a strong risk culture and integrating ORM into the overall risk management framework.
- More use of scenario analysis and stress testing: Scenario analysis and stress testing are becoming increasingly popular as tools for identifying and evaluating potential operational risks. This can help organizations to identify potential vulnerabilities and plan for how they would respond in the event of a risk materializing.
Overall, operational risk management is becoming more critical as organizations try to navigate an increasingly complex and uncertain business environment.
The latest trends in ORM are aimed at helping organizations to identify and manage operational risks more effectively and efficiently by leveraging data and technology, strengthening relationships with third parties, and improving governance and risk culture.
How to Become an Operational Risk Manager
Becoming an operational risk manager typically requires a combination of education and experience in risk management, business management, and related fields.
- Education: Many operational risk managers have a bachelor’s degree in a relevant field, such as finance, business administration, or economics. Some also have graduate degrees, such as a master’s in risk management, business administration, or a related field.
- Professional Certifications: there are several professional certifications available in the operational risk management field, such as Certified in the Governance of Enterprise IT (CGEIT), Certified in Risk and Information Systems Control (CRISC), and Financial Risk Manager (FRM) which globally recognized certifications in the field of risk management
- Work experience: Employers often prefer candidates who have several years of experience in risk management, finance, or a related field. Experience in a specific industry or organization can also be beneficial.
- Strong analytical, problem-solving, and decision-making skills, risk management skills, and the ability to communicate effectively and work well with others.
- Continuing Education: As regulations, technology, and best practices evolve, it is important to stay current with the latest developments in the field by attending training and networking opportunities.
To succeed as an operational risk manager, you will need to deeply understand your organization’s operations and the risks that could potentially impact them. You will also need to be able to work effectively with other departments and stakeholders to develop and implement effective risk management strategies. Strong analytical, problem-solving, and communication skills are essential for success in this role.
Additionally, the role of operational risk management is not only technical. It also involves people, processes, and organizational culture. As a result, operational risk managers are expected to have a broad understanding of their company and its operations.
Operational Risk Manager Advancement Prospects
As an operational risk manager, you can expect to have several advancement prospects within your organization.
- Senior Operational Risk Manager: With several years of experience and demonstrated success in operational risk management, you may be promoted to a senior-level position, such as a senior operational risk manager or director of operational risk management. In this role, you would lead the development and implementation of risk management strategies across the organization. You may also be responsible for managing a team of operational risk managers.
- Divisional or Business Unit Head: As you gain experience, you may also have the opportunity to lead a specific division or business unit within the organization, overseeing the development and implementation of risk management strategies specifically tailored to that unit.
- Enterprise Risk Management: Another possibility is to progress into Enterprise Risk Management (ERM) function, which has the responsibility for ensuring that all the risks the organization faces are appropriately identified, measured, managed, and reported to management and the board.
- Risk Consulting: Another possibility is to move into a risk consulting role, where you would provide risk management advice and expertise to organizations in a variety of industries.
- Training and mentoring: With experience, you could take on a more mentoring role, working with and guiding newer or less experienced team members in their risk management endeavors.
- Chief Risk Officer (CRO): With enough experience, it is possible to be promoted to the role of CRO, who is the head of risk management for the entire organization and a member of the senior management team responsible for the overall risk management strategy.
Ultimately, the advancement prospects for an operational risk manager will depend on a number of factors, including the size and structure of the organization, the level of investment in risk management, and the specific qualifications and experience of the individual.
Operational Risk Manager Job Description Example
Here is an example of a job description for an operational risk manager:
Job Title: Operational Risk Manager
Reports to: Director of Risk Management
Job Summary: The operational risk manager is responsible for identifying, evaluating, and managing operational risks that could negatively impact the organization’s ability to achieve its objectives. The operational risk manager will work closely with other departments and stakeholders to develop and implement risk management strategies and processes that help to mitigate or avoid these risks.
- Identify and evaluate operational risks: Analyze data, assess processes and systems, and evaluate the potential impact of risks on the organization.
- Develop and implement risk management strategies: Develop and implement strategies and processes to mitigate or avoid identified risks.
- Monitor and report on risk: Regularly monitor the effectiveness of risk management strategies and report on the status of risks to management and the board.
- Work with other departments and stakeholders: Collaborate with other departments and stakeholders to identify, evaluate, and manage risks.
- Ensure compliance with regulatory requirements: Stay current on all relevant regulatory requirements and ensure the organization is compliant.
- Continuously improve risk management processes: Regularly review and improve risk management processes to ensure they are effective and efficient.
- Bachelor’s degree in a relevant field such as finance, business administration, or economics.
- Minimum 5 years of experience in risk management, finance, or a related field.
- Professional certifications in risk management are an advantage.
- Strong analytical, problem-solving, and decision-making skills.
- Strong communication and teamwork skills.
- Familiarity with relevant regulations and industry best practices.