Operational Risk Management Framework for Service Outsourcing: Consideration of Risk Dimensions and their Application into the Framework

As outsourcing is becoming mandate for today’s business, there has been a variety of researches taking place. This paper discusses on managing operational risks in an organization where one or more business processes are being outsourced. We first review on changing nature of operational risks not only in outsourced process itself, but also among any other interrelated processes. Then a conceptual operational risk management framework is introduced. The framework combines the advantages of Key Risk Indicator Framework and Bayesian Network Causal Modeling concepts. The detailed development process is discussed in five phases along with the development tools and their applications. This paper concludes with the comparison of proposed framework with other existing operational risk models.