What is a common strategy for managing operational risk?

Implementing robust internal controls and procedures is a widely recognized and effective strategy for managing operational risk. This approach involves establishing a systematic framework of policies and procedures designed to safeguard assets, ensure the integrity of financial reporting, and comply with laws and regulations. Robust internal controls help organizations identify potential risks before they occur and provide mechanisms to mitigate those risks, thereby reducing the likelihood of operational failures and enhancing overall efficiency.

Internal controls may include checks and balances within processes, regular monitoring and audits of operations, training staff on best practices, and developing clear guidelines for various functions. By focusing on these controls, organizations can maintain greater oversight of their operations, thus minimizing the chances of errors, fraud, and other risks that can impact the business.

The other options, while relevant to different aspects of business operations, do not directly address the fundamental components of operational risk management. Investing in marketing strategies and reducing workforce size are more aligned with strategic planning and cost management rather than the mitigation of risks that arise from operational activities. Relying on third-party audits can be beneficial, but it is often a supplement to internal controls rather than a primary strategy for managing operational risks.