7 Operational Risk

A session in which we describe and compare the alternative strategies for managing the risk of operational failure: rigorous appraisal, disciplined following of procedures and employee empowerment.

Synopsis

The last twenty years has seen a rapid growth in the use of management systems in a wide range of areas of operations management. The earliest systems were quality management systems, notably BS5750 in the UK and its international offspring ISO9000. The reasosn for this growth will be discussed and the implications for operations management considered.

Objectives

• Be able to explain how quality management is increasingly a subset of risk management
• Be able to contrast systems theory and management systems approaches to risk
• Be able to explain that management of risk is increasingly audit based
• Be able to summarise Power’s critique of the “Audit Society”

Key Terms

• High Reliability Organizations
• ISO 9000
• ISO 14000
• ISO/IEC 27001
• Basel II
• Sarbanes-Oxley Act
• Risk Society

Papers

• Ten Arguments Against ISO9000, Managing Service Quality
  Volume 7, Number 4, 1997, pp. 162–168.
• Collective Mind in Organizations: Heedful Interrelating on Flight Decks, Weick, Karl E., Roberts, Karlene H.Administrative Science Quarterly, September 1, 1993, 38, 357-35725, 25p;
• Managing High Reliability Organizations, Roberts, Karlene H.California Management Review, June 1, 1990, 32, 101-10113, 13p;

Online Resources

BSi Management Systems Website

This website describes the standards for management that BSi will certify companies against.

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