Business Process Management (BPM) is the understanding, visibility and continuous improvement of business processes. With the help of BPM, an organization can identify business process-specific key operational risk indicators. BPM streamlines the entire process of Operational Risk Management.

Business processes are complex, dynamic and intertwined throughout the organization. Everything that happens within organizations today is a business process. Some processes (like opening of a new account) are relatively easy to structure, because each instance is much like the previous. Other processes (such as new product review process involving business, risk management and internal control functions) are more difficult to structure because a wide array of contributing factors make each release different. In many organizations, the way in which processes are designed to work is often far different from the reality of how they actually function. Business Process Management (BPM) is an approach which effectively structures, automates and manages cross-functional processes. BPM allows processes to be modeled and then dynamically maintained as business requirements are refined or modified in the light of changing needs. BPM solutions comprise a set of tools which allow an organization to create, transform and streamline its internal and external processes and tasks.

Basel II has defined operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Additionally, practical experience has shown that across business processes there are typical areas of significant operational risk exposure driven by variables such as type and the number of handoffs. Several techniques are used to control or mitigate operational risk. Internal controls are seen by virtually all organizations as the primary means to control operational risk. The effectiveness of Operational Risk Management (ORM) is dependent on the quality of controls. As controls are embedded in the business processes themselves, the quality of controls in turn is dependent on the effectiveness of the business processes. Managing business processes is the key for operational risk management. It can be inferred from the above that BPM is nothing but a way of managing operational risk.

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