In the last twenty years, businesses have sought to increase the
speed of service delivery to the customer in a bid to gain com-
petitive advantage. For instance, manufacturers have re a l i z e d
that, in an age where products become obsolete more quickly,
reducing time-to-market and inventory stock levels, instituting
integrated just-in-time production and delivery processes, can
make the diff e rence between success and failure. As discussed in
Chapter 1, customers have become more uncompro m i s i n g ,
wanting and demanding increasing levels of quality serv i c e .
Risk management has, traditionally, not oriented itself to this
objective. But trends suggest that as managers deal with
increasing uncertainty in their marketplace, they will begin to
forge links between risk management and improved customer
In Chapter 1, we characterized ‘service delivery’ as ‘the orga-
nization’s ability to perform business processes on an ongoing
basis’. The success or failure to maintain operational continu-
ity is dependent on the effectiveness of a wide range of opera-
tional and management practices. In this chapter, we examine:
1 Capacity management.
2 Human resource management.
3 Supplier management.
4 Service management.
5 Sourcing management.
6 Project management.
7 Crisis management.
These areas cover the gamut of risks that organizations face in
their bid to improve the speed and quality of service delivery to
customers, from the ‘high-fre q u e n c y, low-severity’ risks inher-
ent in small-scale operational incidents, to the ‘low-fre q u e n c y,
high-severity’ risks that can cause a crisis and bring them down.
The starting point for managing risk in these areas is an under-
standing that operational issues have a direct bearing on
strategic management. Continuity of operations determines
the context in which managers can manage. More particularly,
failure at the operational level has a knock-on effect at the
strategic level. Running smooth operations gives managers
more time and choice to make better decisions. Ongoing oper-
ational risk management can generate the right information so
that managers can ﬁne-tune their tolerance, or appetite, for
risk-taking in the future.
The key aim is being able to better control the quality and con-
tinuity of service to the customer. Today’s organizations are
ﬁnding that customer satisfaction is becoming the key ‘differ-
entiator’ separating them from the competition. Operational
risk management can play a vital role in ensuring that man-
agers can systematically improve customer service by ensuring
that they have a strict rein over operations and service delivery.
We have mediated this message through the various sections in
Capacity management: Managing demand and supply is
critical to the timely delivery of a product or service to the
customer, and ensures that the risks associated with opera-
tional business processes are managed to an acceptable level
and bottlenecks are avoided.
Operational delivery 103
Human resource management: Operational continuity and
delivery of service is as much dependent on the ‘continuity’
of human assets as it is of physical assets. In other words, if
a culture exists where people are not motivated, the ability
of the organization to deliver the service effectively will be
called into question.
Supplier management: Control and management of risk in
the supply chain is an essential part of ensuring that the
product is delivered in the most efﬁcient way possible to the
S e rvice management: O rganizations want to ensure that
their IT systems are an asset and do not become a liabil-
i t y, in the understanding that IT is now far more critical to
the success and operational continuity of business opera-
t i o n s .
Sourcing management: Outsourcing is becoming an impor-
tant way in which businesses can achieve their strategic
objectives, but they can only do this if they do not suffer a
loss of control over increasingly key processes, assets and
people. Operational risk management has a key role to play
in ensuring that this does not happen.
Project management: The creation of a project supporting
c u l t u re and the management of project related risks.
Projects are absolutely vital if organizations are to achieve
change and progress in their marketplace. Projects are a
classic case of where strategic aims depend heavily on the
continuity of operations and ability of people to meet dead-
lines. Linking strategy and operational oversight is a key
objective, then, of operational risk management in this
Crisis management: When crises occur, one of the main
dangers that organizations face is a loss of reputation, with
plummeting sales of their product or service in the market.
104 Operational Risk and Resilience