Operating risk


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Operating risk

The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk.

Operating Risk

Risk from sources other than inadequate funding (credit risk) or a change in market factors (market risk). Basel II defines operating risk as the "risk of loss resulting from inadequate or failed internal processes, people and systems or from external events." Thus, operating risk may come from mundane sources such as incompetent personnel or miscommunication between a buyer and a seller, or it may stem from events beyond a firm's control, such as terrorism, damage to goods in transport, or even a sudden drop in demand. Because it is not (primarily) financial, it is the most difficult type of risk to quantify. Sometimes, operating risks are predictable; for example, a farmer can prepare for a drought that would harm his/her harvest and therefore profits. On the other hand, risk from an employee's fraud is often impossible to anticipate. Consultancies often offer operating risk management, identifying and attempting to eliminate it as much as possible. See also: Political risk, Reputational risk.
References in periodicals archive ?
NEW YORK -- Fitch Ratings has reviewed and clarified its methodology for rating tax-supported bonds with financial operating risk related to a public enterprise.
CHICAGO -- Fitch Ratings believes that Entergy's spin-off company, Nuclear Spinco, will have a moderate to moderately high operating risk profile, as discussed in a special report published today.
Fitch applies this business and operating risk evaluation to U.
Basis Point Group's expertise covers quantitative operations performance measurement, derivatives processing, risk and compliance controls, trading and IT strategy to help firms recognize major improvements in productivity and oversight while dramatically reducing operating risk.
The ratings and positive rating outlook also consider the January 2006 approval of OE's Rate Certainty Plan by regulators in Ohio and the lower operating risk.
InfoZen has extensive experience designing, deploying and operating risk assessment and risk management solutions.
Direct Energy Essential Home Services provides service support to the portfolio and receives 35% of aggregate rental revenues; thereby significantly reducing the Fund's operating risk.
Basis Point Group's clients have recognized major improvements in productivity and oversight while dramatically reducing operating risk.
Important factors that could cause the actual results to differ materially from those projected include, without limitation, the availability and costs of drilling rigs and other oilfield services, drilling and operating risks, exploration and development risks, and other risks inherent in Whittier's business that are detailed in its Securities and Exchange Commission filings.
Important factors that could cause our actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, drilling and operating risks, the availability of drilling rigs, uncertainties about the estimates of reserves, the availability of transportation pipelines, changes in laws or government regulations, unforeseen engineering and mechanical or technological difficulties in drilling the wells, operating hazards, weather related delays, the loss of existing credit facilities, availability of capital, and other risks more fully described in our filings with the U.
Important factors that could cause the actual results to differ materially from those projected include, without limitation, the possibility that the acquisition may involve unexpected costs, the volatility in commodity prices for oil and gas, the presence or recoverability of estimated reserves, the ability to replace reserves, the availability and costs of drilling rigs and other oilfield services, drilling and operating risks, exploration and development risks, and other risks inherent in Whittier's business that are detailed in its Securities and Exchange Commission filings.
The library has minimal operating risks, with past changes in financial position related to the internal funding of capital expenses.
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