Which practice can help mitigate operational risk?

Enhancing internal controls and processes is an effective practice for mitigating operational risk because it involves establishing robust procedures that help prevent errors, fraud, and other disruptions in daily operations. By systematically reviewing and improving the processes that govern how tasks are executed and decisions are made, organizations can identify potential risks and weaknesses within their operations.

Effective internal controls can include segregation of duties, regular audits, comprehensive training for employees, and the use of technology to minimize human error. All of these contribute to creating a more reliable and resilient operational environment, which ultimately reduces the likelihood of operational failures and improves overall risk management.

Establishing stringent sales targets, while potentially improving performance incentives, may inadvertently encourage risky behaviors and do not directly address the operational risk element. Increasing profit margins without focusing on the operational aspects does not inherently reduce risk, and concentrating solely on external market factors neglects internal vulnerabilities that can lead to operational issues.