Operational Risk Flashcards
What is Operational Risk?
The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.” These failures include computer breakdowns, a bug in a key piece of computer software, errors of judgment, deliberate fraud, and many other potential mishaps.
Operational risk covers such a wide area that it is useful to subdivide operational risk into two components, operational failure risk and operational strategic risk.
What is Operational Failure Risk?
Operational failure risk arises from the potential for failure in the course of operating the business. A firm uses people, processes, and technology to achieve business plans, and any one of these factors may experience a failure of some kind. Accordingly, operational failure risk can be defined as the risk that there will be a failure of people, processes, or technology within the business unit.
