THE IMPORTANCE OF OPERATIONAL CONTROLS IN EFFECTIVE RISK MANAGEMENT AND BUSINESS PRACTICES

Business Operations

Operational controls are not necessarily ‘popular’ in the sense that people enjoy performing them or consider them a fun aspect of business operations. However, they are vital and widely recognized as a necessary component of effective risk management and good business practices.

 

Operational control is a process in which the activities and processes within an organization are evaluated and assessed to ensure they are efficient, effective, and in line with the organization’s objectives and policies. The purpose of operational controls is to identify risks, ensure compliance with procedures, minimize inefficiencies, and enhance the quality of products or services.

 

OPERATIONAL CONTROLS

In many sectors, particularly in regulated industries such as the financial sector, healthcare, and food industry, operational controls are mandatory due to legal requirements and regulations. Organizations are required to implement and maintain certain operational controls to comply with laws and regulations and to ensure the integrity and security of their operations.

 

While implementing and maintaining operational controls may sometimes be seen as an administrative burden, they are crucial for identifying and managing risks, ensuring regulatory compliance, minimizing operational inefficiencies, and improving the overall operational performance of an organization.

 

Operational controls can take various forms, including internal audits, process evaluations, performance indicators, and continuous monitoring of activities. These controls can be performed both routinely and ad hoc, depending on the organization’s needs and the nature of the activities being monitored.

 

OBJECTIVES

The operational control objectives focus on improving the efficiency, effectiveness, and compliance of operational processes within an organization. Some specific objectives of operational control are:

 

IDENTIFICATION AND CORRECTION OF OPERATIONAL INEFFICIENCIES

Operational controls aim to identify inefficiencies in operational processes, such as resource wastage, process delays, or unnecessary steps. By identifying and correcting these inefficiencies, organizations can save costs and increase productivity.

 

IMPROVEMENT OF PRODUCT AND SERVICE QUALITY

Operational controls also focus on ensuring the quality of products and services delivered by the organization. By closely monitoring operational processes, deviations or defects can be identified and corrected, thereby increasing customer satisfaction and enhancing the organization’s reputation.

 

RISK MANAGEMENT

Operational controls play a crucial role in identifying and managing operational risks within an organization. Through control measures, potential risks can be identified and minimized, enabling the organization to better prepare for unforeseen events that may disrupt operational activities.

 

COMPLIANCE WITH REGULATIONS AND POLICIES

Operational controls also aim to ensure compliance with laws and regulations, internal policies, and procedures within the organization. By verifying that operational processes comply with applicable standards and guidelines, organizations can avoid fines, legal issues, and reputational damage resulting from non-compliance.

 

CONTINUOUS IMPROVEMENT

Another important objective of operational controls is to promote continuous improvement within the organization. By regularly evaluating the effectiveness of operational processes and collecting feedback, organizations can continuously optimize their processes and strengthen their competitive position.

 

Operational controls

 

THE PROCESS

The process of an operational control typically involves the following steps:

 

IDENTIFICATION OF PROCESSES AND ACTIVITIES TO BE CONTROLLED

This involves identifying the key operational processes and activities critical to achieving the organization’s objectives.

 

DETERMINATION OF CONTROL MEASURES

Once the processes to be controlled are identified, control measures are established to manage risks, ensure compliance, and minimize inefficiencies. These measures may include internal controls, procedures, guidelines, and standards.

 

IMPLEMENTATION OF CONTROL ACTIVITIES

The actual control activities are carried out according to the established control plan. This may include conducting checks, audits, reviews, and inspections, as well as collecting and analyzing relevant data and information.

 

EVALUATION OF CONTROL FINDINGS

After the control activities are completed, the findings are evaluated and analyzed to identify deficiencies, risks, and improvement opportunities. These findings are then reported to relevant stakeholders within the organization.

 

FOLLOW-UP AND CORRECTIVE ACTION

Finally, any identified deficiencies or risks are followed up with appropriate corrective actions. This may include implementing improvements in processes, procedures, training, or systems to enhance operational performance and minimize future risks.

 

CONCLUSION

In conclusion, operational control is an essential process for organizations to ensure the efficiency, effectiveness, compliance, and quality of their operational activities.

 

While operational controls may not be ‘popular’ in the traditional sense of the word, they are taken seriously due to their critical role in protecting organizations from risks and promoting compliance and efficiency. They enable organizations to identify risks, improve processes, and optimize performance to achieve organizational objectives and strengthen their competitive position.

 

Link to the Spanish version, and the Dutch version

 

The images used in this article belong to their original creators.

Tags :

Business Operations

Share This :

Leave a Reply

Your email address will not be published. Required fields are marked *