Understand and Control Operational Risk with KPI Set

Operational Risk measuring KPI - Balanced Scorecard metrics template example Financial Institution acts as a complicated mechanism and even a small failure can cause serious implications. Operational risk is defined as the risk of loss resulting from poor or failed internal processes, people and systems, or from external events.

Only systematic and enterprise-wide approach can grasp all the details that are essential for the successful risk management. This BSC provides for an integrated approach to the risk measurement and supervision.

It identifies major areas of risk as Legal Risk, Technology Risk, Human Error and External Factors and suggests methodology for their measurement, thus allowing for the complex monitoring of the operation condition of the company.

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More ideas on using Operational Risk KPI

Operational risks pertain to that set of risks, which arise from an organization's operations. Some of these are- fraud risks, physical risks, environmental risks and legal risks.

Extending the definition, one gets that risk emerging from sources like 'people', 'systems', 'internal processes' and 'external happenings' is classified under the head 'operational risk'. There can be malfunctioning or failure in any/all of these components, which makes it important to use a monitoring tool. This serves the purpose of keeping things 'on track'.

Due to the very broad scope of this subset of 'risks', it is not possible for a single department to take care of the complete range. This causes the division of risks to various other operational units. In other words, different divisions are involved in dealing with risks that trouble them. For instance, HR departments are involved in taming personnel risks; IT (Information Technology) division ensures that information risks are kept to minimum.

Moving on the basics of operational risks, one deciphers that all organizations are likely to become victim of these dangers but firms belonging to banking sector have been particularly found to be at a higher risk.

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Operational Risk Evaluation Balanced Scorecard Screenshots

The Balanced Scorecard (BSC) dashboard indicates performance within each perspective and the total performance of .

This is the actual scorecard with Operational Risk Indicators and performance indicators.

Metrics for Financial Estimation

This is the actual scorecard with Operational Risk Indicators and performance indicators. The performance indicators include: legal risk metrics, regulatory risk, contractual disputes, employment practices risk, environmental risk, technology risk metrics, system downtime, loss of assets, business continuity planning, human factor metrics, employee errors, employee turnover rate, breach of confidentiality, internal fraud, external risk metrics, technology provider failure, system security, theft and fraud.

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