Operations Due Diligence vs Operations Risk Management

The meaning of the word risk has changed substantially over the last 20 years or so which has caused confusion in the operations risk management space. It used to refer to potentially catastrophic events for which insurance was normally purchased, a meaning which is still used by Factory Mutual and Lloyds underwriters.

In more recent times it has become associated with the term management, which has morphed it from the consideration of potentially catastrophic events to a process, which determines the optimum risk (upside and downside) outcomes, epitomised by the concept of ‘risk appetite’.