Description: Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems. This type of risk can arise from various sources, including technology failures, human errors, fraud, and natural disasters. Unlike other types of risks, such as market risk or credit risk, operational risk focuses on the internal operations of an organization. Effective management of operational risk is crucial to ensure business continuity and protect assets. Organizations must implement adequate internal controls, policies, and procedures to mitigate these risks. Additionally, organizational culture plays an important role, as open communication and a proactive approach to risk identification and management can help prevent significant losses. In an increasingly digital business environment, operational risk has also expanded to include cyber threats, making cybersecurity an essential component of operational risk management. In summary, operational risk is a critical aspect that organizations must address to ensure their sustainability and long-term success.
