"Operational risk is probably one of the most misunderstood risks in the whole of the risk spectrum.
While risks such as “credit risk”, “liquidity risk”, “market risk” are easily understood by business and other professionals, “operational risk” is a poor relation when it comes to grasping what it really means.
The starting point, of course, is to define what we mean when we speak about operational risk.
My favourite definition is that formulated by the “Basel Committee on Banking Supervision” in its “Principles for the Sound Management of Operational Risk” (BIS - June 2011).
The definition reads;
“Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.”
