| The term Operational Risk Management
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| | reporting of those losses, affect
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| (ORM) is not new. It has been tossed
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| | virtually all areas of every business
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| about in businesses across North America
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| | each and every day. Therefore, it is in
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| for the last several years. ORM and the
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| | each company's best interest to
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| oft associated term Enterprise Risk
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| | simultaneously find ways to cut losses
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| Management (ERM) have generally been used
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| | while keeping regulatory compliance costs
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| as corporate buzzwords, business culture
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| | down. Hence the rebirth of Operational
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| idioms referenced in board meetings and
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| | Risk Management/Enterprise Risk
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| articulated during presentations. Recent
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| | Management and the new demand for Risk
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| developments, such as the creation of the
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| | Management software solutions.
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| Sarbanes-Oxley (SOX) Act in 2002 in
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| | Traditionally, few operational losses
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| response to growing financial scandals in
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| | were measured in any accounting system,
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| the U.S., have brought Operational Risk
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| | and rarely were the loss incidents
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| Management, Enterprise Risk Management
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| | tracked and analyzed in any way; the time
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| and related concepts from the backrooms
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| | and paperwork required to do so was
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| to the forefront of corporate America.
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| | simply daunting. Because there was no
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| The inescapable reality is that every
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| | standard legislation in place, any Risk
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| single day businesses incur losses and
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| | Management software tools were often
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| experience operational disruptions due to
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| | proprietary and slightly more than
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| failures by employees, incorrect
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| | electronic log books at best. New
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| implementation of processes and
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| | technologies and attitudes have allowed
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| technologies as well as wilful
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| | loss incidents to be seen as more
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| disobedience to internal controls. These
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| | predictable and able to be grouped into
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| losses may be manifest in the form of
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| | risk categories. Proper analysis of these
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| uncollectible receivables from
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| | incidents can result in attribution to
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| disappointed clients, lost sales due to
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| | root causes which aids in mitigation.
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| call centre failures or unproductive
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| | Even this beginning leads to dramatically
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| employee downtime when computer systems
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| | reduced costs while achieving huge gains
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| are unavailable, or a host of other
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| | and strategic advantages from well
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| potential problems. While most businesses
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| | crafted Operational Risk Management
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| have developed ad hoc methods of dealing
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| | policies and Enterprise Risk Management
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| with such losses in the past, legislation
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| | procedures.
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| (such as SOX and the Basel Accord) has
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| | Changes in legislation, technology and
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| made standardized compliance procedures
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| | attitudes related to ORM/ERM have
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| much more complex. Thankfully, just as
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| | produced not just economic gains, they
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| these new rules have given rise to
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| | have led directly to re-invigorated
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| increased awareness of ORM/ERM, new tools
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| | business innovation and even created
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| (including Risk Management software) have
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| | improvements in the quality of life. For
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| been developed to aid compliance efforts.
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| | example, safety, quality and
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| The new regime of Sarbanes-Oxley, under
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| | environmental related loss incidents have
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| the direction of the Public Company
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| | proven to be not only manageable and
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| Accounting Oversight Board (PCAOB) which
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| | avoidable, but sound management of these
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| is in turn accountable to the Security
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| | issues has conferred greater advantage on
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| and Exchange Commission (SEC), has
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| | those who succeeded while driving many
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| undoubtedly benefited the business world
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| | who did not adapt out of business. While
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| by providing a foundation from which to
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| | large scale corruption may have brought
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| decrease corporate fraud. However, the
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| | about regulatory changes, these changes
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| complexity and associated technical,
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| | have spurred a re-visioning of Enterprise
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| labour and administrative costs posed to
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| | Risk Management. Advanced Risk Management
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| business is also considerable. The
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| | software has allowed business to more
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| realities of both individually large and
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| | directly mitigate losses. This has
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| collectively mundane errors resulting in
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| | resulted in a cleaner, more efficient and
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| loss, as well as the newly regulated
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| | more competitive business environment.
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