Operational risk identification focuses on the day-to-day processes, people, and systems that drive the business. Risk teams use a structured Failure Mode and Effects Analysis (FMEA) framework to identify operational vulnerabilities. [1]
FMEA Evaluation Metrics
The FMEA framework evaluates potential operational failures across three main factors:
- Failure Mode Identification: Documenting every way a process, system, or asset could fail to perform its required function.
- Effect Analysis: Mapping the operational consequences of each failure mode on customers, production schedules, and business continuity.
- Root Cause Mapping: Identifying the underlying reason for the potential failure, such as equipment wear, lack of training, or software bugs.
By identifying these failure modes early, operations managers can build redundancies and automated checks directly into daily workflows, reducing the likelihood of disruptive process breaks.
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