What Are The 4 Operational Risks?

New World Norm covers all areas of risk management, including the four main operational risks which we’ll explore below. 


The four primary operational risks for businesses are usually the following:

  1. People Risk

This refers to risks associated with employees, such as human error, fraud, misconduct and issues related to workforce management (like training and retention).

The actions of staff can directly affect operational processes in all kinds of ways. Errors, negligence or incompetence can lead to process failures, disruptions, or inefficiencies.

In many countries, regulatory bodies often hold organisations accountable for the actions of their employees. Non-compliance due to employee misconduct or inadequate training can result in fines, legal action, or reputational damage.

Risks related to employees can have a significant impact on your reputation. Incidents of employee misconduct, such as fraud or unethical behaviour, can erode trust in the organisation and its products/services, leading to loss of customers and business opportunities.

Human errors can lead to financial losses through various means, whether it’s operational disruptions, regulatory fines, litigation costs, or loss of revenue due to damage to your reputation. 

People risk also refers to factors related to work culture and staff morale. 

staff morale

Poor culture, lack of communication, or low morale can lead to decreased productivity, higher turnover rates, and difficulties in attracting and retaining talent.

Understanding and managing risks related to people is crucial for effective risk management. This includes measures such as robust recruitment processes, comprehensive training programs, effective performance management, and promoting a positive organisational culture.

  1. Process Risk

This involves risks related to the processes and procedures within your organisation. It includes inefficiencies, failures in internal controls, inadequate or outdated systems, and disruptions to operations.

It’s important for a number of reasons in operational risk management. For starters, it can help to identify weaknesses. 

Assessing process risks helps in identifying weaknesses or vulnerabilities within the operational processes. By understanding where these weaknesses lie, you can take proactive measures to mitigate them before they escalate into larger problems.

It also helps to prevent losses. Process risks can lead to financial losses, damage to reputation, and regulatory penalties if not managed effectively. By identifying and addressing process risks, organisations can prevent or minimise the impact of such losses.

By analysing process risks, New World Norm can help you to streamline your operations and enhance efficiency.

 By understanding where inefficiencies or bottlenecks exist, you can optimise processes to reduce waste and improve productivity.

Many industries are subject to regulatory requirements governing their operations. By identifying process risks, organisations can ensure that they remain compliant with relevant regulations and standards, thereby avoiding potential fines or legal consequences.

Understanding process risks enables organisations to build resilience against potential disruptions. By implementing controls and contingency plans, businesses can better withstand unexpected events such as natural disasters, cyber-attacks, or supply chain disruptions.

Assessing process risks provides valuable information for decision-making at all levels of an organisation. Whether it’s allocating resources, implementing new technologies, or entering into new markets, understanding process risks helps decision-makers make informed choices that align with a company’s objectives.

  1. Systems Risk: 

This refers to risks associated with information technology systems. They often include:

  • cybersecurity threats
  • system failures
  • data breaches
  • outdated technology. 

Nowadays, most businesses rely heavily on their IT infrastructure. You might also need supply chain management software and financial systems to conduct your operations. 

Any failure or disruption in these systems can directly impact your operations, leading to financial losses, dissatisfied customers, and damage to your reputation. 

As businesses evolve, their systems become more intricate. This complexity introduces new vulnerabilities and potential points of failure. New World Norm can help you understand and manage these risks, ensuring the smooth functioning of operations.

Many systems are interconnected, meaning that a failure in one system can cascade across others. For example, a cyberattack on a company’s IT system could disrupt its supply chain management or customer service systems. Recognizing these interdependencies helps in identifying systemic risks and implementing appropriate mitigation strategies.

System failures can have significant financial implications, including direct costs associated with system repairs or replacements, as well as indirect costs such as lost revenue and increased operational expenses. 

  1. External Risk

These are risks that stem from external factors beyond your control. This includes regulatory changes, market volatility, geopolitical events, natural disasters, and macroeconomic shifts.

External risks often have ripple effects across industries and regions. For example, a political crisis in one country can disrupt supply chains globally. Understanding these interconnected risks allows organisations to anticipate and prepare for potential domino effects.

External risks tend to be complex and dynamic, making them challenging to predict and manage. They may emerge suddenly or evolve gradually, requiring constant monitoring and adaptation of risk management strategies.

Each of these risks requires careful assessment, management, and mitigation strategies to safeguard the stability and success of the business. 

Find out more about our operational risk management services.  Or don’t hesitate to contact our team for more information.

Do you need to

✅ Safeguard your Team?
✅ Be ready for Business Disasters?
✅ Improve your Supply Chain?
✅ Improve Inventory Management?
✅ Evaluate your business Risks?
✅ Educate your teams on Risk Management?
Contact us today so that we can work with you to create effective solutions that deliver results.
Celebrating 30 years in Loss Prevention