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 ?
Perceived operational risk management includes the mechanisms, policies, tools, processes, and procedures including management oversight to determine, evaluate, supervise, describe, and control operational risk.
In order to achieve this success, we place high value on empowering our staff and as such are pleased to have offered this training to increase our team's awareness of possible threats to Gulf Bank's mandate, and to focus on sound international control practices to further align the organization's operational risk awareness culture.
Although our paper has some similarities with the previous studies regarding the exploration of risk disclosure in annual reports, it goes further to examine the extent of the specific operational risk disclosure.
The objectives of the DSS survey were to benchmark and measure the maturity of Operational Risk Management (ORM) in organizations across industries and to examine the challenges organizations face in managing risk.
Keywords: Operational Risk Management, Advance Measurement Approach, Basel II, Internal and External Fraud, Scenario Analysis
In accordance with the present concern with operational risk and the uncertainty associated with it, there was motivation on the part of the British Banker Association for the emergence of the first risk regulation through internal models.
Among the many decisions to be made, and in part due to proven weaknesses with the internal models approach, it is proposing that all banks adopt a new standardised approach for calculating operational risk capital.
The Basel Committee on Banking Supervision (BCBS) first released Principles for the BCBS 195, Sound Management of Operational Risk in 2011.
Currently Orkhan is vice president safety and operational risk for AGT.
The new Manufacturer's First Response, a Marsh and Beazley Breach Response (BBR) initiative, offers coverages tailored specifically to address cyber and operational risks faced by manufacturers, including:
Operational risk management functions are properly defined and the framework used to monitor incidents is reasonable and subject to continuous improvement.
1 November 2018 - Dutch information services and publishing company Wolters Kluwer N.V.'s (AEX: WKL) Wolters Kluwer Legal and Regulatory business has acquired industrial operational risk management software provider eVision Industry Software BV for USD 145m, the company said.
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