Operational Risk Advisory

Introduction: What is Operational Risk Advisory?

Operational risk represents the threat of loss resulting from inadequate or failed internal processes, people, systems, or external events. For businesses operating in Georgia, especially medium and large enterprises, managing operational risks is critical for maintaining financial stability and reputation. Operational risk advisory involves a comprehensive legal and organizational analysis aimed at identifying weak points in a company's activities—whether it is a malfunction in labor relations, mismanagement of contracts, data protection flaws, or non-compliance of production processes with legislation. Qualified lawyers and risk managers help companies create a governance structure that minimizes the probability of human error and technical malfunctions.

What Does This Service Cover?

Operational risk advisory is a multi-layered process that touches almost every aspect of a business. Specialists work in the following directions:

• Audit of Internal Regulatory Documentation: Checking and updating internal labor regulations, codes of ethics, and safety policies to ensure compliance with Georgian legislation.
• Human Resources Risk Management: Developing mechanisms to prevent errors, fraud, or abuse of power by employees.
• Contractual Risk Analysis: Reviewing contracts with suppliers and partners to avoid operational delays caused by counterparty faults.
• Legal Assurance of Information Security: Ensuring data protection and cybersecurity protocols comply with the law to rule out systemic failures.
• Outsourcing Risk Assessment: Creating control mechanisms for services transferred to third parties (e.g., accounting, IT).
• Development of Business Continuity Plans (BCP): Legal support for action plans in crisis situations (e.g., pandemics, force majeure).

Common Real-World Scenarios

Businesses need operational risk management in various real-world scenarios:

• Information Leak by an Employee: When a company does not have a strict confidentiality agreement, and an employee transfers trade secrets to a competitor.
• Supply Chain Disruption: When a key partner fails to supply raw materials, and the company has no specified penalties or legal plan for alternative sourcing.
• Violation of Occupational Safety: A workplace injury caused by the lack of safety briefing, leading to high fines and litigation.
• System Failure in Banking or Fintech: A software error causing transaction stoppages and client claims.
• Internal Fraud: Misappropriation of company funds by an accountant or manager due to a weak internal control system.

Georgian Legal Framework

Operational risk management is based on several key legislative acts of Georgia. The Law on Entrepreneurs imposes a duty of care on directors and management, which implies reasonable risk management. Failure to fulfill this duty may result in personal liability for the leadership. The Organic Law — Labor Code of Georgia and the Law on Occupational Safety regulate employee behavior, safety, and disciplinary responsibility, which are central parts of operational risk management.

Additionally, the Law on Personal Data Protection and the Law on Information Security set standards, the violation of which leads to both financial sanctions and operational paralysis. For the financial sector, the regulations of the National Bank of Georgia on operational risk management are also crucial.

Service Process

Working with a specialist involves several stages:

1. Diagnostics: The lawyer and risk manager study the company's existing structure, processes, and documentation.
2. Risk Identification: A "Risk Map" is drawn up, where discovered threats are distributed by priority (high, medium, low).
3. Strategy Development: A specific action plan and legal documents (policies, contracts) are created to reduce risks.
4. Implementation and Training: Introducing new rules and retraining employees.
5. Monitoring: Periodic checks on how effectively the implemented system is working.

Why Use Legal.ge?

Legal.ge is a platform connecting you with leading law firms and risk management experts operating in Georgia. Through us, you can find specialists who have experience specifically in your industry—whether it is banking, manufacturing, or technology. Professionals registered on the platform will help you turn operational risk management into a competitive advantage for your business and avoid unforeseen financial losses.