--- title: "Operational Risks: How They Can Hurt You and How to Manage Them" description: Many companies look at strategic risks. Few consider operational risks, a potentially costly oversight. Learn how to identify, assess, and mitigate risks to enhance business resilience and prevent costly disruptions. image: https://mha-it.com/hubfs/Imported_Blog_Media/business-continuity-importance-1.jpg --- [Skip to content](https://mha-it.com/blog/how-to-manage-operational-risks#main-content) [![MHA by BCMMetrics - navy](https://46330580.fs1.hubspotusercontent-na1.net/hub/46330580/hubfs/MHA%20by%20BCMMetrics%20-%20navy.png?width=245&height=54&name=MHA%20by%20BCMMetrics%20-%20navy.png "MHA by BCMMetrics - navy")](https://mha-it.com/) - [Our Consulting Services](https://mha-it.com/what-we-do) - [Business Continuity](https://mha-it.com/business-continuity) - [Crisis Management](https://mha-it.com/crisis-management) - [Disaster Recovery](https://mha-it.com/disaster-recovery-consulting-services) - [BCaaS](https://mha-it.com/bcaas) - [Program Augmentation](https://mha-it.com/program-augmentation) - [Training and Awareness](https://mha-it.com/training-awareness) - [Our BC Software](https://bcmmetrics.com/) - Resources - [Blog](https://mha-it.com/blog) - [News](https://mha-it.com/news) - [About Us](https://mha-it.com/who-we-are) - [Our Team](https://mha-it.com/our-team) - [Clients](https://mha-it.com/clients) - [In the Community](https://mha-it.com/in-the-community) [Contact Us](https://mha-it.com/contact) [![mhalogo](https://mha-it.com/hubfs/mhalogo.svg "mhalogo")](https://mha-it.com/) [Contact Us](https://mha-it.com/contact) [![mhalogo](https://mha-it.com/hubfs/mhalogo.svg "mhalogo")](https://mha-it.com/) - [Our Consulting Services](https://mha-it.com/what-we-do) - [Business Continuity](https://mha-it.com/business-continuity) - [Crisis Management](https://mha-it.com/crisis-management) - [Disaster Recovery](https://mha-it.com/disaster-recovery-consulting-services) - [BCaaS](https://mha-it.com/bcaas) - [Program Augmentation](https://mha-it.com/program-augmentation) - [Training and Awareness](https://mha-it.com/training-awareness) - [Our BC Software](https://bcmmetrics.com/) - Resources - [Blog](https://mha-it.com/blog) - [News](https://mha-it.com/news) - [About Us](https://mha-it.com/who-we-are) - [Our Team](https://mha-it.com/our-team) - [Clients](https://mha-it.com/clients) - [In the Community](https://mha-it.com/in-the-community) [Contact Us](https://mha-it.com/contact) [![mhalogo](https://mha-it.com/hubfs/mhalogo.svg "mhalogo")](https://mha-it.com/) [Contact Us](https://mha-it.com/contact) - [Our Consulting Services](https://mha-it.com/what-we-do) - [Business Continuity](https://mha-it.com/business-continuity) - [Crisis Management](https://mha-it.com/crisis-management) - [Disaster Recovery](https://mha-it.com/disaster-recovery-consulting-services) - [BCaaS](https://mha-it.com/bcaas) - [Program Augmentation](https://mha-it.com/program-augmentation) - [Training and Awareness](https://mha-it.com/training-awareness) - [Our BC Software](https://bcmmetrics.com/) - Resources - [Blog](https://mha-it.com/blog) - [News](https://mha-it.com/news) - [About Us](https://mha-it.com/who-we-are) - [Our Team](https://mha-it.com/our-team) - [Clients](https://mha-it.com/clients) - [In the Community](https://mha-it.com/in-the-community) [Contact Us](https://mha-it.com/contact) Risk Management # Operational Risks: How They Can Hurt You and How to Manage Them Richard Long Updated on: November 15, 2024 #### Relevant Contents #### Need Tailored Business Continuity Insights? Contact Us Now for Personalized Guidance! [Schedule a Free Consultation](https://mha-it.com/contact) Relatively few organizations today take a proactive approach toward managing operational risk, a potentially costly oversight. In today’s post, we’ll look at the main types of operational risk and discuss why and how to mitigate them. \[Related on MHA Consulting: [Checking It Twice: The Corporate Risk Mitigation Checklist](https://mha-it.com/blog/corporate-risk-mitigation-checklist)\] ## Defining Operational Risk Operational risk is the potential for losses or disruptions in business operations arising from internal failures in processes, systems, human errors, or external events. Left unaddressed, such risks have the power to disrupt daily operations, lead to financial losses, and harm the company’s reputation. Many organizations consider risk at the strategic level, looking at risks in terms of the economy, their competition, the marketplace, insurance, and so on. (Risk analysis at this level is usually carried out by executives.) Unfortunately, the risks that threaten companies’ ability to carry out their operations are widely neglected, often with painful results. ## The Benefits of Managing Operational Risk Actively managing operational risk offers several important benefits to businesses. The key advantage is that it reduces the likelihood of an outage, lessening the associated costs of financial losses, reputational damage, and loss of trust. Managing operational risk also improves efficiency, enhances decision-making, promotes compliance, increases stakeholder confidence, reduces the risk of fraud, and strengthens the [organization’s culture.](https://mha-it.com/blog/operational-risk-management) Finally, as traditional business continuity, with its focus on restoring operations after a disruption, gives way to the emerging, “always-on” philosophy of operational resilience, managing operational risk is becoming essential for any organization that hopes to meet the higher expectations of the customers of tomorrow.  ## Types of Operational Risks The following are some of the most common categories of operational risks: ### Process Failures When standard processes within the company break down or are not followed. Examples: - Inadequate quality control procedures - Mismanagement of supply chains leading to delays - Overreliance on a single individual for critical tasks ([single point of failure](https://mha-it.com/blog/single-points-of-failure)) ### Human Error These are mistakes made by employees that lead to operational disruptions or financial losses. Examples: - Miscommunication between departments - Data entry errors - Failure to follow safety protocols ### System Failures Technical issues that disrupt business operations Examples: - IT system crashes - Software bugs or failures - Cyberattacks ### External Events Events beyond the company’s control that can disrupt operations. Examples: - Natural disasters - Strikes - Supply chain disruptions due to external factors (e.g., pandemic) ### Fraud and Malfeasance Losses due to internal or external fraud. Examples: - Employee theft or embezzlement - Cyber fraud by external actors - Misrepresentation by suppliers or vendors ### Legal and Compliance Risks Failure to comply with laws, regulations, or industry standards. Examples: - Regulatory fines due to non-compliance - Legal disputes with customers or partners - Violations of labor laws or data privacy regulations (e.g., GDPR) ### Reputation Risks Damage to a company’s brand or how it is perceived. Examples: - Negative media coverage - Product recalls - Disparagement on social media ### Supplier and Vendor Risks Risks related to reliance on external vendors or suppliers. Examples: - Key supplier going out of business - Delivery delays from third-party suppliers - Vendor-supported apps or servers that are not patched regularly, creating a security vulnerability ### Health and Safety Risks Risks related to the well-being of employees, customers, or other stakeholders. Examples: - Workplace accidents or injuries - Inadequate health and safety protocols - Health crises impacting employee availability   ---   Understanding these categories of operational risks is essential for businesses to effectively identify vulnerabilities and implement strategies that minimize disruptions, protect assets, and ensure long-term success.   ---   ## Steps to Manage Operational Risks How can an organization move from awareness of the main operational risk types to actively managing the risk to its own operations? The best method is to take a structured approach incorporating the following steps:  ### Identify Risks Using the list above as a guide, identify the potential risks specific to your organzation, looking at processes, systems, people, and external factors. ### Assess and Prioritize Evaluate the likelihood and impact of each risk, focusing on high-priority areas. ### Implement Controls Develop and apply procedures, technologies, and safeguards to mitigate identified risks. This should include measures to address the potential loss of critical technology components, such as portals to access essential third-party services. Ensure that redundancy, backup plans, and workarounds are in place to minimize disruption. This includes at the level of the business departments, independent of IT. ### Monitor and Report Continuously track risks and performance, using Key Risk Indicators (KRIs) and reporting mechanisms. ### Develop Contingency Plans Create and test business continuity and disaster recovery plans to ensure quick recovery from disruptions. ### Train and Assign Responsibility Educate employees on risk management practices and assign accountability for key risks. Ensure that training programs include strategies to mitigate single points of failure by sharing critical knowledge across the team. ### Review and Improve Regularly review risk management strategies and update them based on new insights or emerging threats. ### Engage External Expertise If the demands of managing operational risks exceed the organization’s ability or availability, consider using tools such as BCMMetrics or engaging specialists such as the consultants at MHA Consulting. ---   By following these steps, companies can build a comprehensive and proactive operational risk management framework that enhances resilience and safeguards against disruptions. ---   ## Protecting Against Threats and Enhancing Resilience Effectively managing operational risks is crucial for maintaining business continuity and achieving long-term success. By proactively identifying and addressing risks—ranging from process failures and human errors to technology vulnerabilities and external threats—organizations can significantly reduce the likelihood of costly disruptions.  Implementing a structured approach that includes risk assessment, control measures, and ongoing training helps ensure that potential issues are mitigated before they impact operations. Ultimately, a robust operational risk management strategy not only protects against immediate threats but also boosts efficiency and enhances overall resilience. ---   ### Further Reading - [Single Points of Failure: Protecting Yourself from Hanging by a Thread](https://mha-it.com/blog/single-points-of-failure) - [Every Single Day: Make Risk Management Part of Your Company’s Culture](https://mha-it.com/blog/operational-risk-management) - [Types of Risk: Don’t Forget to Keep Tabs on Your Long-Term Risks](https://mha-it.com/blog/types-of-risk) - [Checking It Twice: The Corporate Risk Mitigation Checklist](https://mha-it.com/blog/corporate-risk-mitigation-checklist) - [The Risk Management Process: Manage Uncertainty, Then Repeat](https://mha-it.com/blog/risk-management) --- ![](https://mha-it.com/hubfs/Richard%20Long-MHA-Consulting.png) #### Richard Long Richard Long is one of MHA’s practice team leaders for Technology and Disaster Recovery related engagements. He has been responsible for the successful execution of MHA business continuity and disaster recovery engagements in industries such as Energy & Utilities, Government Services, Healthcare, Insurance, Risk Management, Travel & Entertainment, Consumer Products, and Education. Prior to joining MHA, Richard held Senior IT Director positions at PetSmart (NASDAQ: PETM) and Avnet, Inc. (NYSE: AVT) and has been a senior leader across all disciplines of IT. He has successfully led international and domestic disaster recovery, technology assessment, crisis management and risk mitigation engagements. ## Start building a stronger future ##### Navigate uncertainty with an expert - schedule your free consultation with our CEO, Michael Herrera. [Schedule your consultation](https://mha-it.com/contact) ## Other resources you might enjoy ![](https://46330580.fs1.hubspotusercontent-na1.net/hub/46330580/hubfs/Blog%20images/Imported_Blog_Media/Getting-the-Most-out-of-Your-Vendor-Search2.jpg?height=245&name=Getting-the-Most-out-of-Your-Vendor-Search2.jpg) #### [Trust, But Verify: 7 Best Practices for Managing Vendor Risk](https://mha-it.com/blog/best-practices-third-party-risk-management) [Read More](https://mha-it.com/blog/best-practices-third-party-risk-management) ![non it business continuity](https://mha-it.com/hs-fs/hubfs/Imported_Blog_Media/non-it-related-business-continuity-1.jpg?height=245&name=non-it-related-business-continuity-1.jpg) #### [The Neglected Side of Business Continuity: Problems Not Related to IT](https://mha-it.com/blog/non-it-business-continuity) [Read More](https://mha-it.com/blog/non-it-business-continuity) ![communication in a crisis](https://mha-it.com/hs-fs/hubfs/Imported_Blog_Media/comminication-in-a-crisis-1.jpg?height=245&name=comminication-in-a-crisis-1.jpg) #### [Crisis Communication: 5 Rules for Getting the Message Right](https://mha-it.com/blog/communication-in-a-crisis) [Read More](https://mha-it.com/blog/communication-in-a-crisis) ## Ready to start focusing on higher-level challenges? 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