The importance of the process approach in the risk mitigation

Leszek Chodorowski

Ekonomia journal, 2009, vol. 23

Abstract: This article describes the importance of the process management in a given institution (first of all financial institution), especially in area of the risk reduction. The correct implementation of the process approach in given institution involves to take up several performances. Firstly identification of all processes in the institution, this means building the process map. Next the institution should establish for a given process: its income and outcome, the purpose and the effect (product, service) strictly connected with it, the process sources (staff, things) and finally risks identified in the process. What’s more in article author’s opinion the every process can be described as the mathematical function. Generally speaking the established process map should facilitate to run effectively the risk management. Moreover the Key Risk Indicators (KRI), which are systematically calculated, can support the objectivity of the risk assessment in the range of the risk management. Simultaneously the risk map can be also useful in order to conduct: the cost budgeting, the internal control and internal audit activity, the implementation of new IT softwares, the analysis of effectiveness and efficiency of the organizational framework and the human resources, the analysis of internal procedures etc.

The few central banks in the Western Europe implemented a few ages ago the process maps. In the range of this maps, especially in the range of the identified processes, the levels of risk were estimated and reduced. As far as the National Bank of Poland (NBP) is concerned, this bank implemented in 2005 the unique 3-level risk management system. The NBP is permanently improving this system at present.

Date: 2009
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