What is the primary focus of operational risk management?

The primary focus of operational risk management is to identify and mitigate risks that arise from inadequate or failed internal processes, people, systems, or from external events. This aspect of risk management is crucial for organizations because operational failures can lead to significant financial loss, reputational damage, and regulatory penalties.

Operational risks encompass a wide range of potential issues, including fraud, legal risks, technological failures, and business disruptions. By focusing on identifying these risks and implementing effective controls or strategies to mitigate them, organizations can enhance their resilience and ensure smoother operations.

In terms of the other options, maximizing stockholder returns relates to investment strategies and financial performance rather than directly addressing the risks associated with everyday operations. Setting strategic financial goals falls under corporate strategy and finance rather than operational risk. Monitoring market trends and conditions pertains to market risk and external economic factors, which are distinct from the internal risks managed under operational risk management. Therefore, the correct focus is on identifying and mitigating risks from operational failures to protect the organization’s assets and maintain efficiency.