What is the first principle of Operational Risk Management (ORM)?

The correct answer emphasizes the importance of assessing risks in relation to potential benefits. Accepting risk when the benefits outweigh the cost is a key principle of Operational Risk Management (ORM) because it highlights the necessity of not only identifying risks but also understanding the trade-offs involved in decision-making. This approach ensures that risks are not arbitrarily avoided, but are instead judiciously accepted when the potential positive outcomes justify the exposure. In this way, ORM encourages a balance between caution and opportunity, allowing for effective risk management that aligns with organizational goals.

Understanding this principle is essential, as it informs how decisions are made in various operational contexts, ensuring that teams can progress with initiatives while remaining aware of the associated risks. This principle helps organizations to pursue innovation and efficiency knowing that risks are considered in a structured manner.