The risk of loss resulting from inadequate or failed internal processes, people, systems, or external events affecting business operations. This includes fraud, system failures, human errors, and natural disasters.
From Latin 'operationalis' (relating to work) and Old English 'risc' (danger). This risk category was formally recognized by regulators in the 1990s as banks realized that technology failures and human errors could cause losses as severe as credit defaults.
Operational risk is like all the things that can go wrong in running a restaurant beyond customers not paying their bills - the chef might quit, the freezer could break, or someone could slip and sue you. For banks, a single rogue trader or computer glitch can cause billion-dollar losses!
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