Abstract
Operational risk is defined as the potential losses resulting from events caused by inadequate or failed processes, people, equipment, and systems or from external events. One of the most important challenges for the management of the company is to improve its results through its operational risk identification and evaluation. Most of Enterprise Risk Management (ERM) scholarship has roots in the finance/risk management and insurance (RMI) discipline, mainly in the banking sector. This study proposes an innovative operational risk assessment methodology (OpRAM), to evaluate operational risks focused on telecommunications companies (TELCOs), on the basis of an operational risk self-assessment (OpRSA) process and method. The OpRSA process evaluates operational risks through a quantitative analysis of estimates which inputs are the economic impact and the probability of occurrence of events. The OpRSA method is the “engine” for calculating the economic risk impact, applying actuarial techniques, which allow estimation of unexpected losses and expected losses distributions in a TELCO. The results of the analyzed business unit in the field work were compared with standardized ratings (acceptable, manageable, critical, or catastrophic), and contrasted against the company’s managers, proving that the OpRSA framework is a reliable and useful management tool for the business, and leading to more research in other sectors where operational risk management is key for the company success.
Highlights
It is known that business organizations find their fundamental purpose through value creation for stakeholders, usually represented by their customers, shareowners, employees, shareholders, suppliers as well as by the social impact they produce (Krause and Tse 2016).A common aspect of the organizations is that in their strategic and operational decisions, they face uncertainty
This study proposes an innovative operational risk assessment methodology (OpRAM), to evaluate operational risks focused on telecommunications companies (TELCOs), on the basis of an operational risk self-assessment (OpRSA) process and method
The main result of this study is the building, description, and application of an operational risk assessment methodology (OpRAM) which has two components: an operaThe main result of this study is the building, description, and application of an opertional risk self-assessment process (OpRSA process) and an operational risk self-assessment ational risk assessment methodology (OpRAM) which has two components: an operamethod (OpRSA method), for evaluating operational risks in a telecommunications comtional risk self-assessment process (OpRSA process) and an operational risk self-assesspany (TELCO)
Summary
It is known that business organizations find their fundamental purpose through value creation for stakeholders, usually represented by their customers, shareowners, employees, shareholders, suppliers as well as by the social impact they produce (Krause and Tse 2016). A common aspect of the organizations is that in their strategic and operational decisions, they face uncertainty. ERM (Enterprise Risk Management), a basic reference of this research study, is a framework (COSO 2004; COSO 2017) that covers various risk types that organizations face (Karaca and Senol 2017). Beals et al (2015) explains that ERM facilitates the awareness of risk factors which helps management in making decisions. The focus of ERM is the deployment of a risk management process for the business, enabling the adoption of best practices with the stakeholders’ support. A key step of the risk management process is risk evaluation (COSO 2017)
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
