Saturday, August 4, 2012

What is Strategic Risk & Operational Risk? How to Manage Risks

Strategic Risk

Strategic risk rises due to business pursuing particular strategy.

Probability and impact (hazard) of risk depends upon the type of strategy followed by business.

Strategic risk arises at higher levels of business and it can be best controlled at higher levels of business.

Strategic risk gives rise to long-term risk.


Operational Risk

Operational risk rises due to pursuing day-to-day business activities.

Operational risk arises at lower levels of business. It can be best controlled at lower levels of business. Therefore, involvement of lower level management in risk management process and internal control system is considered essential.

Operational risk gives rise to short-term risk. Therefore, day-to-day supervision is required to manage operational risk.