What are the four principles of Operational Risk Management (ORM)?

The four principles of Operational Risk Management (ORM) emphasize a balanced approach to managing risks associated with operational activities. The correct choice highlights a critical aspect of these principles, which is to accept risk when the benefits outweigh the costs. This principle encourages individuals and organizations to evaluate potential risks against the expected outcomes. It acknowledges that while risks are inherent in any operation, informed decision-making can lead to situations where those risks are justified by the benefits they produce.

The essence of ORM is not to avoid risk entirely, but to understand and manage it effectively. By assessing the benefits versus the potential downsides, one can make strategic decisions that enhance overall performance and safety. This principle embodies a practical and rational approach to risk management, allowing for innovation and progress while maintaining safety and accountability.

In contrast, the other options reflect more extreme or impractical views on risk management. Accepting all risks to maximize benefits disregards the importance of a careful assessment of potential downsides. Always avoiding risks at all costs can lead to paralysis or missed opportunities, as risk is unavoidable in operational contexts. Ensuring every risk is eliminated is not feasible, as complete risk elimination is practically impossible; the aim should be to manage and mitigate risks effectively rather than attempt to eliminate them entirely. This nuanced