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Operational Variance Management

The aim of an operational risk framework is to identify, assess, control and mitigate operational risk and to champion effective reporting of risk and emerging risk issues. The Operational Risk Management and Control (ORMC) methodology has been developed to facilitate operational risk management at plant floor level, within the industrial manufacturing environment. Operational risk presents itself in the form of process instability, inconsistency and variable interpretation of process conditions. Consequences of high operational risk include energy inefficiency, variable performance, high variable cost and low morale.

ORMC forms an integral element of the overall operational risk framework, as it provides an excellent opportunity for a production plant to integrate and co-ordinate its risk identification and risk management efforts and generally to improve the understanding, control and insight of its operational risks.

ORMC provides a systematic means of identifying control gaps that threaten the achievement of defined business or process objectives and monitoring what management is actually doing to close these gaps. It is therefore an integral component of good operational risk management.

The findings of ORMC can be used to formulate appropriate action plans to address identified control gaps, taking into account risk-reward considerations. With progress against these plans monitored as part of the overall operational risk management approach. In this respect ORMC promotes analysis and monitoring of factors that affect the level of operational risk exposure.

A further driving force behind the growth and emergence of ORMC is the fact that ORMC acts as a complementary audit and management tool, as well as being the means to satisfy corporate governance and regulatory requirements.

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