The correct answer highlights the crucial initial phases of operational risk management, focusing specifically on identifying potential hazards and assessing their associated risks. This step is fundamental because it establishes a clear understanding of what risks exist within an organization and evaluates their potential impact. By identifying and assessing hazards, organizations can prioritize risks based on their likelihood of occurrence and potential severity, which is essential for effective risk management.
The process of risk assessment typically involves gathering data, analyzing the nature and extent of risks, and understanding how those risks can affect operations. This foundational knowledge enables organizations to craft informed strategies for risk mitigation and control implementation in subsequent stages.
Identifying and assessing hazards is integral to ORM because it forms the basis for making informed decisions about risk management strategies, resource allocation, and the effectiveness of existing controls. By thoroughly evaluating these aspects, organizations are better equipped to navigate the complexities of operational risks.