What is Operational Risk?

Operational risk is the risk a company faces as a result of their operations (the functional aspects of delivering their value proposition). Think of the risk associated with company processes, systems, equipment, or employees. It can be compared to the risk associated with the market or the financial structure.

How does Operational Risk Work?

Operational risk focuses on how value is being delivered or how operations are being carried out. It focuses on the possibility of interruptions or failures. What tasks are being carried out. What are the risks to interruption. It includes risks from human error or oversight. The extent to which human error is applicable will vary between industries. Areas in which you could observe operational risk are in equipment durability and maintenance, human decision-making, communication processes.