Operational Risk


DEFINITION of 'Operational Risk'

A form of risk that summarizes the risks a company or firm undertakes when it attempts to operate within a given field or industry. Operational risk is the risk that is not inherent in financial, systematic or market-wide risk. It is the risk remaining after determining financing and systematic risk, and includes risks resulting from breakdowns in internal procedures, people and systems.

BREAKING DOWN 'Operational Risk'

Operational risk can be summarized as human risk; it is the risk of business operations failing due to human error. Operational risk will change from industry to industry, and is an important consideration to make when looking at potential investment decisions. Industries with lower human interaction are likely to have lower operational risk.

  1. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  2. Financial Risk

    The possibility that shareholders will lose money when they invest ...
  3. Non-Operating Asset

    Classes of assets that are not essential to the ongoing operations ...
  4. Risk

    The chance that an investment's actual return will be different ...
  5. Market Risk

    The possibility for an investor to experience losses due to factors ...
  6. Beta

    Beta is a measure of the volatility, or systematic risk, of a ...
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