Operational Risk Explained

Operational risk refers to the potential for loss resulting from inadequate or failed internal processes, people, and systems, or from external events. It encompasses a wide range of risks, including fraud, legal risks, and physical or environmental risks. Organizations must identify, assess, and manage these risks to ensure business continuity and protect their assets.

Key Components of Operational Risk

1. Process Failures: Inefficiencies or breakdowns in internal processes can lead to significant losses.

2. Human Error: Mistakes made by employees can result in operational disruptions.

3. External Events: Natural disasters or cyber-attacks can severely impact operations.

Effective risk management strategies are essential for mitigating operational risks.

Operational Risk Explained

Operational risk refers to the potential for loss resulting from inadequate or failed internal processes, people, and systems, or from external events. It encompasses a wide range of risks, including fraud, legal risks, and physical or environmental risks. Organizations must identify, assess, and manage these risks to ensure business continuity and protect their assets.

Key Components of Operational Risk

1. Process Failures: Inefficiencies or breakdowns in internal processes can lead to significant losses.

2. Human Error: Mistakes made by employees can result in operational disruptions.

3. External Events: Natural disasters or cyber-attacks can severely impact operations.

Effective risk management strategies are essential for mitigating operational risks.

Understanding Operational Risk

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