Business Process and Risk Analysis
A business process and risk analysis policy is a program that helps a corporation's top management understand important mechanisms in a company's activities and risks implicit in operational processes. Departmental heads typically provide a business process and risk analysis report to top leadership based on business needs, industry practices and the company's size.
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Business Process Defined
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Business process consists of all activities that identify and appraise various systems and departments in a corporation's activities, including marketing, finance and sales revenues or vendor processes. To illustrate, a business process analysis at a bank may show how the institution generates revenues. It may reveal procedures that employees follow to open a bank account for an individual or a company, manage a depositor's assets and provide adequate customer service to a client.
Business Process Function
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Types of business process professionals vary, depending on the company and industry practices. As a practical matter, a business process study at a large department store may cover three areas -- marketing, billing and purchasing. Marketing activities may reveal how the store promotes merchandise and how seasonal factors affect marketing campaigns. Billing department processes may explain how the company sends out invoices to customers and credit terms. Purchasing procedures may show how the firm selects suppliers and payment terms that they offer.
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Risk Analysis Defined
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Risk analysis helps a corporation's top management understand various exposures (risks) implicit in a company's operations. Risks may be financial, operational or technological. As an illustration, a financial risk analysis may instruct a manager on how the corporation identifies, assesses and monitors risks of loss due to business partner defaults (credit risk) or unfavorable security price variations (market risk). Alternatively, a technological risk study may reveal what critical computer information systems help a firm operate.
Risk Analysis Significance
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Analyzing the variety of risks inherent in corporate activities is pivotal, because it provides top leadership with tools and methodologies to prevent losses in operations. For instance, a senior risk director at a bank may note in the company's credit transactions that loan amounts disbursed are too high for small business owners. Consequently, she may advise the bank's credit department to limit loans to $1 million per customer every year for clients generating less than $50 million in sales.
Business Process and Risk Analysis
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Business process and risk analysis are distinct corporate activities but there are instances in which they may interrelate. To exemplify, assume an investment bank wants to buy a small savings and loans institution. The bank's top executives may ask a business process analyst and a risk specialist to partner on the project. Both employees may review the small company's major departments, understand important procedures and analyze risks inherent in its operations.
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References
- Air University: Marine Corps Institute: Operational Risk Management
- Federal Aviation Administration: Chapter 15: Operational Risk Management (ORM)
- GARP: Global Association of Risk Professionals: Financial Risk Manager
- IATA: Corporate Risk Management
- Boston University: Process Management Training Solutions for You and Your Company
- Photo Credit process flow image by Christopher Hall from Fotolia.com
