Operational Risk Management (ORM) is primarily concerned with which type of risks?

Operational Risk Management (ORM) focuses specifically on operational risks, which are the risks arising from internal processes, people, systems, and external events that affect an organization's operations. These risks can stem from various sources, such as inadequate or failed internal processes, human error, system failures, or external events like natural disasters.

The primary objective of ORM is to identify, assess, monitor, and mitigate these operational risks to enhance an organization's resilience and ensure continuity of operations. This involves the implementation of robust controls, risk assessment frameworks, and continuous monitoring to minimize the potential impact of operational failures.

The other types of risks mentioned—market risks, credit risks, and sovereign risks—are distinct from operational risks. Market risks pertain to the potential for financial losses due to changes in market conditions, such as fluctuations in interest rates or stock prices. Credit risks involve the possibility that a borrower will default on a loan or obligation, impacting the lender's financial health. Sovereign risks relate to the financial risks associated with a country's ability to meet its debt obligations, which can be influenced by political or economic factors. While these risks are important in the broader field of risk management, they fall outside the specific scope of operational risk that ORM directly addresses.