operational risk [English]

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Syndetic Relationships

InterPARES Definition

n. ~ A level of risk that results from inadequate or failed internal processes, people, and systems, or from external events.

Other Definitions

  • Information Security Handbook Glossary 2009 (†486 ): The risk of loss to the business from operations and technology functions based on the failure of people, processes or systems or from external events (fires, storms, earthquakes, etc.). Operation risk includes such disciplines as information security, business continuity planning, records management and operational controls.

Citations

  • Principles . . . Operational Risk 2011 (†518 p. 3): The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk. (†812)
  • Wikipedia (†387 s.v. "operational risk"): The risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses". This definition from the Basel II regulations was also adopted by the European union Solvency II Directive." ¶ It can also include other classes of risk, such as fraud, security, privacy protection, legal risks, physical (e.g. infrastructure shutdown) or environmental risks. ¶ Operational risk is a broad discipline, close to good management and quality management. In similar fashion, operational risks affect client satisfaction, reputation and shareholder value, all while increasing business volatility. ¶ Contrary to other risks (e.g. credit risk, market risk, insurance risk) operational risks are usually not willingly incurred nor are they revenue driven. Moreover, they are not diversifiable and cannot be laid off, meaning that, as long as people, systems and processes remain imperfect, operational risk cannot be fully eliminated. ¶ Operational risk is, nonetheless, manageable as to keep losses within some level of risk tolerance (i.e. the amount of risk one is prepared to accept in pursuit of his objectives), determined by balancing the costs of improvement against the expected benefits. (†810)
  • Wikipedia (†387 s.v. "operational risk, background"): Until Basel II reforms to banking supervision, operational risk was a residual category reserved for risks and uncertainties which were difficult to quantify and manage in traditional ways[4] - the "other risks" basket. ¶ Such regulations institutionalized operational risk as a category of regulatory and managerial attention and connected operational risk management with good corporate governance. (†811)
  • Wikipedia (†387 s.v. operational risk): "the risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses". ...It can also include other classes of risk, such as fraud, security, privacy protection, legal risks, physical (e.g. infrastructure shutdown) or environmental risks. ...operational risks affect client satisfaction, reputation and shareholder value, all while increasing business volatility. (†1073)