Market analysis isn't a core ORM component; here's what actually matters in operational risk management.

Which component is NOT typically included in Operational Risk Management (ORM)?

• A. Risk assessment
• B. Risk identification
• C. Market analysis
• D. Risk mitigation

Answer: (C)

Operational Risk Management (ORM) primarily focuses on identifying, assessing, and mitigating risks that arise from the internal processes, people, systems, or external events that can affect an organization’s operations. The key components of ORM typically include risk assessment, risk identification, and risk mitigation. Each of these components plays a critical role in developing a comprehensive risk management strategy tailored to an organization's needs. Risk assessment involves evaluating the potential impact of identified risks and determining their likelihood. Risk identification is the systematic process of recognizing potential risks that could impede the organization's objectives. Risk mitigation encompasses strategies and measures put in place to reduce the likelihood or impact of these risks. Market analysis, on the other hand, is more aligned with analyzing external market conditions and economic factors that can influence business environment and performance, but it does not pertain directly to operational risks at the level required in ORM. While market conditions can affect operational strategies, they are not a core component of operational risk management focused on internal processes and risks. Thus, it stands out as a component that is not typically included in ORM procedures.

Ever had a day at work when something goes wrong, and you think, “If only we had spotted that risk sooner”? That gut feeling is exactly what Operational Risk Management (ORM) is meant to capture. ORM is all about spotting the bumps in the road before they trip you up, then lining up a plan to handle them. Here’s the thing most people get tangled in: market analysis—the broader economic picture—sounds important, but it isn’t typically a core piece of ORM. The practical focus of ORM lives in the everyday, internal world of a company: people, processes, systems, and the events that can derail operations.

Let me explain with a simple picture. Imagine your organization as a busy kitchen. The chef (leadership) wants every dish to come out perfectly. The sous-chefs, line cooks, and dishwashers are the people who actually run the kitchen. The ovens, mixers, software order boards, and inventory systems are the tools and pathways that keep the kitchen humming. The pantry’s stock level, the supplier on-time delivery, and the maintenance crew all influence how smoothly service goes. In that kitchen, ORM is about spotting what could go wrong in those internal pieces—the risks baked into ordinary work—and deciding how to prevent or reduce the impact.

What ORM typically includes (and what it doesn’t)

If you’ve been around ORM discussions, you’ll often hear three core components mentioned:

• Risk identification: This is the “eyes open” phase. It’s all about recognizing potential problems that could stop the operation from meeting its goals. You don’t wait for a crisis to start naming risks. You map out where the failures could slide in—think human error, faulty processes, missing controls, technology glitches, or external events that disrupt daily routines.

• Risk assessment: Once you’ve found risks, you measure them. How likely is this risk to occur? How big would the impact be if it happened? The numbers help you prioritize where to focus effort. A common approach is to rate risks on a scale and then create a visual map to show which ones deserve attention now and which can wait.

• Risk mitigation: With priorities in hand, you design and implement controls to reduce either the chance of a risk or its consequences. This includes policies, procedures, training, technology fixes, contingency plans, and clearly defined responsibilities. The goal isn’t perfection but a tolerable level of risk—where the residual risk after controls is something you’re willing to live with.

These three pieces form a loop: identify risks, assess them, then mitigate and monitor. It’s not glamorous, but it’s practical. When done well, this trio creates a living system that alerts you to new risks as the business changes, and it keeps the engine running smoothly.

Market analysis belongs to a different circle

Now, where does market analysis fit in? In short: it’s a vital discipline, but it sits outside the tight, operational arc of ORM. Market analysis looks outward—at industry trends, competitive dynamics, macroeconomic shifts, and regulatory or policy changes that shape the business environment. Those factors can influence strategy and long-term planning, and they certainly color risk exposure. But ORM is primarily concerned with internal exposure: things that can go wrong inside the organization and how to handle them.

A quick contrast helps. Your ORM lens asks: Could a process flaw in our order entry system cause late deliveries? Could a key supplier’s failure interrupt operations? Do our people have the training to handle a cybersecurity alert? Market analysis, on the other hand, asks: Are we facing a downturn in demand? How is the overall market pricing pressure? What regulatory changes might reshape our operating context in the next year? Both are important, but they guide different kinds of decisions and require different kinds of oversight.

A practical tour of applying ORM components

Risk identification isn’t just a box to check. It’s a living activity that travels through teams and departments. Here are a few practical moves:

• Process mapping: Diagram the steps in critical operations, from production to delivery to billing. Where could a deviation occur? A bottleneck? A single point of failure? Process mapping often reveals hidden dependencies that aren’t obvious at the desk level.

• Incident reporting and near-misses: Create a culture where staff feel safe reporting mishaps or near-misses. Each report becomes data for your risk picture. It’s not about blame; it’s about learning and improving controls.

• Workshops and checklists: Bring cross-functional teams together to brainstorm risks. Use lightweight checklists tailored to specific processes to ensure consistency without bogging people down in formality.

Next comes risk assessment. You’ll want a clear, repeatable way to rate risks, so the same language travels across the organization. Some teams use simple scoring—likelihood and impact on a scale from 1 to 5—while others adopt more formal matrices or heat maps. The key is consistency, so you can compare risks over time and see where to invest attention.

Mitigation is where the rubber meets the road. It’s not enough to say, “We’ll train staff.” You’ll want concrete actions, owners, timelines, and measures to confirm effectiveness. Some common mitigation tools include:

• Controls and procedures: Add steps to prevent errors, such as dual approval for high-risk transactions or automated validations in data entry systems.

• Contingency planning: Develop backup processes and run rehearsals for critical scenarios. A little rehearsing goes a long way when a disruption hits.

• Technology fixes: Apply updates, reinforce access controls, or deploy monitoring that catches anomalies early.

• Training and culture: Ongoing training reduces human error. A culture that values safety and reliability makes those controls stick.

Monitoring and governance tie it all together. A risk register—a living document—keeps track of identified risks, current risk levels, owners, and the status of mitigation actions. Regular governance meetings review what’s changing, what’s working, and where adjustments are needed. The point isn’t to chase perfection, but to stay ahead of shifting risk profiles as the business grows and evolves.

A few practical digressions that still circle back

• Tools you’ll hear about: You don’t need a fancy fortress of software to do ORM, but many teams find value in lightweight risk registers, incident databases, or dashboards that visualize risk heat maps. There’s also value in more formal GRC (governance, risk, compliance) platforms like RSA Archer or SAP GRC when you’re coordinating risk across many units. Even so, the core ideas remain simple: notice risks, judge their importance, and take action.

• A touch of standard wisdom: ISO 31000 offers a principled mindset for risk management. It encourages a context-driven approach, clear leadership, and continual improvement. You don’t have to adopt the entire standard to reap the benefits, but its emphasis on structured thinking and ongoing assessment tracks well with ORM’s goals.

• A friendly analogy you can keep: Think of ORM like a safety net for day-to-day operations. Market analysis is more like watching the weather in the distance: it matters for planning, but the safety net’s strength depends on the loom in your workshop—the internal controls in place, the people who follow them, and the systems that keep things going when pressure mounts.

Why this matters for real-world operations

If you’re on the ground in any industry—manufacturing, healthcare, finance, tech services—you’ve seen how small, mundane issues can cascade into bigger problems. A misrouted shipment, a cybersecurity alert that isn’t triaged quickly, a single outdated procedure that leads to a compliance gap—these aren’t “headline risks”; they’re the everyday frictions that add up. ORM gives you a practical, repeatable approach to handle them before they derail objectives.

In some environments, people mistake ORM for a heavy, theoretical umbrella that covers every imaginable risk. The truth is more approachable: ORM thrives on clarity and discipline. It rewards teams that can name risks clearly, evaluate them honestly, and implement concrete steps that demonstrably reduce exposure.

Putting it all together

So, which component is NOT typically included in ORM? Market analysis. It’s essential and valuable, absolutely, but ORM’s sweet spot lies in the internal mechanics: risk identification, risk assessment, and risk mitigation. Those three elements act as a compass for everyday operations, helping teams stay steady when the pace is high and the stress is real.

If you’re building or refining an ORM program, start with the basics and let the workflow grow with the organization. Involve frontline staff, set regular check-ins, and keep the system simple enough to be lived in, not just read about. A well-tuned ORM approach saves you from scrambling after the fact and frees you to focus on what truly matters—delivering reliable results, day after day.

A quick recap to anchor the idea:

• ORM concentrates on internal risks—people, processes, systems, and external events that directly affect operations.

• The core components are risk identification, risk assessment, and risk mitigation.

• Market analysis serves a strategic function but isn’t a core ORM module.

• Effective ORM blends practical tools, clear ownership, and ongoing monitoring to keep operations resilient.

If you’re exploring ORM in a real-world setting, think through how each piece would look in your own organization. Where would you map processes most clearly? Which risks would you rate as the highest priority? Who should own the mitigation actions, and how will you measure progress? By answering those questions, you’ll build a robust, practical approach that stands up when pressure mounts—and that’s what really matters when the clock is ticking and the room grows quiet.