Operational risk analysis in business processes

• Published in: BT technology journal Vol. 25; no. 1; pp. 168 - 177
• Main Authors: Jallow, A. K., Majeed, B., Vergidis, K., Tiwari, A., Roy, R.
• Format: Journal Article
• Language: English
• Published: Ipswich British Telecommunications PLC 01.01.2007
• Subjects: Business operations; Business process reengineering; Monte Carlo simulation; Network security; Objectives; Project management; Risk assessment; Risk factors; Risk management; Software utilities; Studies; Systems design
• ISSN: 1358-3948; 1573-1995
• DOI: 10.1007/s10550-007-0018-4

The operational continuity of a business process is an important performance indicator that contributes to the perceived quality of service delivery, hence it is important to understand and monitor the underlying issues that can affect the performance of the process. These issues might have been foreseen at the beginning of the process design and deployment phase, or might have emerged during the execution of the process, and must be viewed as risk threats to the business process. Operational risk at service provision level receives little attention and thus there is a need to develop methodologies and tools to identify and analyse business operational risks. The paper briefly reviews existing risk frameworks and selects the COSO framework as the most appropriate for business processes. This framework is modified in order to address and evaluate the main elements of business processes. It defines a statistical approach towards operational risk assessment by quantifying risk factors in each activity within a business process for service provision. A risk forecast is produced for each activity, and for the whole process, to model associated uncertainties and to contribute in identifying the risk factors that affect the business process objectives.