Operational Risk Management Military Style versus Industry Approach

Operational Risk Management

Military risk decision making is often time-critical and made by immediate leadership as the risk conditions emerge. The level of risk planning in the military tends to be rapid and subjective. Operational Risk Management (ORM) attempts to organize a more deliberate process. ORM is intended to be a decision-making tool for leadership at all levels in order to proportion the risk against the mission objectives. The goal is to minimize risk and maximize objectives. The ORM assessment model cycles though a five step process that identifies, assesses, decides, implements, and then monitors the risk hazards. During the assess stage qualitative values are assigned to risk hazards using the appropriate supporting risk matrix of acceptable risks. Risk assessment codes assigned may range from critical to negligible or may reflect likelihood of occurrence. Once the level of risk is assign the decision maker seeks means to reduce most probable high risk as well as increase the benefit or outcomes. This is more or less a subjective gut feel. Controls are implemented and then monitored to ensure that the risk does not begin to increase. If the risk begins to increase the decision-maker may recycle the process to minimize the emergent risk (Naval Safety Center, 2009).

In contrast, risk planning in project management utilizes a breadth of techniques that avoid, transfer, mitigate, and/or accept negative risk or exploit, share, and enhance positive risk factors (Heldman, 2009, pp 264-267). Project risk management utilizes risk matrices to assess the level of risk (Heldman, 2009, pp 250-254). The risk matrices are a common point. In practice, ORM is adjusted to personal style and most often is executed as a talk through process in a huddle or meeting. Whereas, project risk management is more formal and utilizes argumentation structures to support risk decisions. Managers not trained in argumentation may use argumentation unknowingly and sort of wing it to some extent. Understanding this process with supporting reasons will improve project decision making.

The critical factors of success under ORM is to increase awareness of the level of risk involved in order to lower injuries, deaths, mishaps, and property damage as negative effects of risk. As positive outcome of risk management undertaken is unnecessary risk is avoided and decisions are made at the appropriate level. The greatest critical factor of success is to conserve assets to be applied at the decisive time and place (Naval Safety Center, 2009). In industry, conserving assets is often thought of as timing expenditures or allocating resources optimally. This is one point of having a Project Management Office (PMO) but can be managed within the operations and project realms as well. 

References:

Heldman, K. (2009). PMP: project management professional exam study guide. (5 ed.). Indianapolis, IN: Wiley Publishing Company.

Naval Safety Center. (2009). Operational Risk Management. Retrieved from
http://safetycenter.navy.mil/