Assessing current risks is the first step in building an ORM framework.

What is one of the key steps in developing an ORM framework?

• A. Creating a risk diversification strategy
• B. Conducting assessments of current risks
• C. Increasing insurance policies
• D. Limiting stakeholder communications

Answer: (B)

Conducting assessments of current risks is a fundamental step in developing an Operational Risk Management (ORM) framework. This process involves identifying, analyzing, and evaluating the existing risks that an organization faces. By assessing current risks, organizations can understand their risk profile, the likelihood of occurrences, and the potential impact on objectives. This foundational step serves as the basis for prioritizing risk mitigation strategies, implementing controls, and allocating resources effectively. It ensures that the framework is tailored to the specific needs and vulnerabilities of the organization, thereby enhancing overall risk management efforts. The other options, while they may have some relevance in risk management, do not serve the same foundational purpose in developing an ORM framework. For example, creating a risk diversification strategy is a tactic that may be implemented after risks have been assessed, rather than a key step in establishing the framework initially. Increasing insurance policies focuses on risk transfer rather than risk identification or mitigation and can be considered part of a broader risk response strategy. Limiting stakeholder communications does not contribute positively to ORM; in fact, effective communication with stakeholders is crucial for understanding risks and fostering a culture of risk awareness within the organization.

Outline to guide the read

• Hook: Building an ORM framework starts with something you can’t see at first glance.

• Core point: Conducting assessments of current risks is the foundation for any solid ORM effort.

• Why this matters: It reveals what truly threatens objectives, not just what sounds scary.

• What the step looks like: gather data, identify risks, analyze likelihood and impact, document, and prioritize.

• How to do it: interviews, workshops, risk inventories, heat maps, data from audits and incidents, and a living risk register.

• The downstream effect: informs risk appetite, controls, resource allocation, and how you monitor changes.

• Common missteps and how to avoid them.

• Real‑world flavor and tools: ISO 31000, COSO guidance, practical software.

• Close with a nudge: begin with a solid risk assessment and the rest falls into place.

One foundational move that makes the rest possible

Let me explain something simple but powerful: reputable framings of risk don’t start with fancy controls or fancy software. They start with a clear view of what could go wrong right now. In the world of Operational Risk Management (ORM), the first real step is to conduct assessments of current risks. Think of it like mapping terrain before you lay down a road. If you don’t know the lay of the land, any path you pick could lead you into a ditch.

Why this step matters

Why is this the cornerstone? Because risk management is about making smart decisions with imperfect information. By assessing current risks, you get a genuine picture of what matters. Not every risk is equally urgent. Some threats loom large; others whisper in the background. When you assess current risks, you learn:

• What could derail key objectives

• How likely each risk is to occur

• The potential impact if it does

All of those elements help you prioritize. Without this foundation, you’re guessing what to fix first, which means wasting time and money on shiny solutions that don’t move the needle. And let’s face it, organizations don’t get extra budget simply for having more controls; they get it when those controls reduce real risk where it matters most.

What the step actually looks like in practice

So, how do you run a current-risk assessment without turning it into a bureaucratic slog? Here’s a straightforward, practical approach:

1. Gather the data you already have

• Incident reports, loss data, audit findings, and customer complaints

• Process maps and job descriptions

• Existing risk registers or prior risk assessments

• Key internal metrics: process cycle times, defect rates, downtime, and safety records

The aim is to stitch together what you already know before you add new layers.

2. Identify risks across the organization

• What could stop critical objectives? For example, supply delays, data errors, or regulatory changes.

• Consider people, processes, technology, suppliers, and external events.

• Don’t forget emerging risks: changes in market conditions, new regulations, or a shift in customer expectations.

3. Analyze and rate each risk

• Estimate likelihood and impact on objectives. A simple scale—low, medium, high—can work, but you can also use a numerical rating if your team prefers.

• Note interdependencies. A single event can cascade into several problems if controls aren’t designed to catch it early.

• Assess current controls: Are they enough? Do they exist in policy only, or are they actually tested and enforced?

4. Document and visualize

• Build a risk register that’s living, not archival. Include owner, controls, indicators, and review dates.

• Create a heat map or risk map to see hotspots at a glance.

• Tie each risk to objective(s) it threatens, so leadership can see the direct link.

5. Prioritize and plan responses

• Rank risks by a mix of likelihood and impact, adjusted for the organization’s risk appetite.

• Decide on a mix of mitigations: preventions, detections, and responders.

• Allocate resources for the top risks and set measurable milestones.

How to do it well: practical techniques

Here are some friendly, hands-on techniques you can adopt without turning the process into a marathon:

• Interviews and workshops: Sit down with process owners, frontline staff, and leaders. Ask open-ended questions like, “What could derail this process next quarter?” or “Where do you see the most fragile links in our controls?”

• Risk inventories: Maintain a living list of risks with concise descriptions, owners, and status. Keep it simple so people actually use it.

• Data-driven checks: Look at incident trends, near-misses, and performance data. Numbers help separate perception from reality.

• Risk scoring: Use a light-weight scoring model so teams can compare risks side by side. A clear score helps you decide where to act first.

• Documentation that travels: A shared risk register on a collaboration platform ensures risk information travels with the people who own it.

Tools and standards that can help

In the real world, good tools save time and boost confidence. Some widely used anchors in the ORM space include:

• Standards: ISO 31000 for risk management principles and framework, and COSO ERM for governance and risk assessment practices.

• Visualization: heat maps and risk registers that show risk owners, controls, and monitoring indicators at a glance.

• Software options: lightweight tools like spreadsheet-based registers for small teams, up to enterprise solutions such as LogicManager, MetricStream, or RSA Archer that support workflows, controls testing, and audit trails.

• Data sources: incident databases, audit reports, performance dashboards, supplier risk data, and regulatory alerts.

The goal isn’t to chase the latest gadget, but to pick a setup that makes risk assessments repeatable, transparent, and easy to act on.

Common missteps—and how to avoid them

Let’s recognize a few traps so you can skip them:

• Treating risk assessment as a one-off event: Risks evolve. Make assessments a routine (quarterly or with any meaningful change). A living process beats a one-and-done exercise.

• Failing to involve the right people: If process owners aren’t part of the conversation, you’ll miss practical insights and soft signals that only they can provide.

• Focusing only on big-ticket risks: The small, frequent issues often eat up the most resources. Don’t neglect them; they accumulate.

• Overloading the risk register: If you pack it with hundreds of obscure risks, you’ll drown in noise. Prioritize clarity and relevance.

• Making it about compliance rather than resilience: Compliance is important, but the aim is to strengthen the organization’s ability to adapt and endure.

A few analogies to keep things relatable

Think of risk assessment like weather forecasting for a business. You’re not predicting the exact storm; you’re estimating probabilities and potential impacts. If you know a front is moving in, you can adjust inventory, communication, and staffing in advance. Or picture it like maintaining a car. You don’t fix every squeak you hear, but you regularly inspect critical components, so a small issue doesn’t turn into a breakdown on the highway.

A quick tangent on culture and communication

A healthy ORM framework rests on more than documents and dashboards. It needs a culture where people feel safe speaking up about risks, even if it’s uncomfortable. Open channels to share concerns, lessons learned from incidents, and near-misses. When stakeholders see that risk information actually changes decisions, they’ll engage more willingly, which, in turn, makes the whole system smarter. You can’t have a robust framework without that honest feedback loop.

What this means for a modern organization

In today’s world, risk isn’t just about bad weather or bad luck. It’s about complex operations, digital dependencies, and a global network of partners. The step of assessing current risks remains the compass: it tells you where to point your controls, where to invest in monitoring, and where to foster resilience. It’s about being prepared, not paranoid; learning from what’s already happening, not guessing what might happen someday.

If you’re new to ORM or revisiting how you approach risk, start here: assemble a small, cross-functional team, gather the data you’ve already got, talk with process owners, and map out the top risks with simple scores. Keep the register alive with quarterly updates, and use heat maps to illuminate where to act next. This isn’t about chasing perfection—it’s about building a solid, navigable framework that helps people make better decisions when the pressure is on.

A final nudge

The path to a strong ORM framework begins with understanding the ground you stand on. Conducting assessments of current risks is more than a step; it’s the lens that makes every subsequent action meaningful. When you know what truly matters, you can design controls that matter, allocate resources where they count, and foster a culture that treats risk as a shared responsibility, not a solo burden. So, start with the map, keep it fresh, and let the rest follow with clarity and purpose.