Thursday, 4 April 2013

Operational Risk

There are variety of ways to define operational risk. One can find different definitions in different books and over internet. I will quote some of the most common and authentic definitions here for you to have a better understanding. In simple terms "An operational risk is defined as a risk incurred by an organization's internal activities".

From an academic point of view "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. "

A most famous and widely used definition of operational risk is the one written in the Basel II regulations. Basel II is the second of the Basel Accords, (now extended and effectively superseded by Basel III), which include recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The Basel II Committee defines operational risk as "The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events." However, for internal purposes organizations are permitted to adopt their own definition but they should have a minimum set of elements from the Committee's definition.

Basel II divides operational risk into seven different event type categories which are as follow:

  • Internal Fraud: Bribery, intentional mis-marking of positions, tax evasion and mishandling of assets
  • External Fraud Hacking damage, theft of information, forgery and third-party theft
  • Employment Practices and Workplace Safety: Workers compensation, discrimination, employee health and safety
  • Clients, Products and Business Practice: Account churning, fiduciary breaches, product defects, improper trade, antitrust and market manipulation
  • Damage to Physical Assets: Natural disasters, terrorism and vandalism
  • Business Disruption and Systems Failures: Hardware failures, software failures and Utility disruptions
  • Execution, Delivery and Process Management: Negligent loss of client assets, data entry errors, failed mandatory reporting and accounting errors

Today's class is over dear readers :). Now you can sit back and relax. I will discuss methods of operational risk management in the very next post. Stay in touch and keep visiting the Microcom IT's blog.


  1. Robert L William4 April 2013 at 11:25

    It is truly an informative post. I can use this material for my assignment. I am desperately waiting for next post about methods of operational risk management.

  2. Hi! I understand this is sort of off-topic however I needed to ask.

    Does running a well-established website such as yours take a large amount of work?
    I'm brand new to running a blog but I do write in my journal on a daily basis. I'd like to start a blog so I can easily share my personal experience and thoughts
    online. Please let me know if you have any kind of ideas or tips for
    new aspiring blog owners. Thankyou!

    my blog ... scapula muscles golf swing

  3. I do not even know how I ended up here, but I thought this post was great.
    I don't know who you are but definitely you are going to a famous blogger if you are not already ;) Cheers!

    my web site ... las vegas golf colleges

  4. Hello, Neat post. There's an issue with your site in internet explorer, would check this? IE still is the marketplace leader and a big section of folks will leave out your great writing due to this problem.

    Feel free to visit my homepage :: St Cloud Flowers

  5. Hey there! I'm at work surfing around your blog from my new iphone! Just wanted to say I love reading your blog and look forward to all your posts! Carry on the superb work!

    My webpage ... corals Online

  6. Fine way of explaining, and fastidious article to get data concerning my presentation subject matter, which
    i am going to present in school.

    Review my blog post ... lower right back pain after eating

  7. Thanks for sharing your thoughts about basic florist tools.

    Also visit my web-site; Florist St Cloud FL

  8. What i do not understood is in truth how you are now not really a lot more well-appreciated
    than you may be right now. You are very intelligent. You already know therefore
    significantly with regards to this subject, produced me for my part imagine it from
    a lot of numerous angles. Its like women and men don't seem to be involved except it is one thing to do with Girl gaga! Your individual stuffs excellent. All the time take care of it up!

    My page ... Commercial Led Lighting

  9. Hi there friends, pleasant paragraph and pleasant urging commented here, I am actually
    enjoying by these.

    Take a look at my web site;

  10. Hello there, You've done a great job. I'll definitely digg it
    and personally recommend to my friends. I'm confident they will be benefited from this web site.

    My web blog chiropractor hip adjustment

  11. Its like you read my mind! You appear to know so much about this, like you wrote the book in it or something.
    I think that you can do with a few pics to drive the message home
    a bit, but instead of that, this is excellent blog.
    A fantastic read. I will certainly be back.

    Also visit my web-site - athletic injuries+quadratus plantae injury

  12. My family all the time say that I am killing my time here
    at web, however I know I am getting familiarity all the time by reading thes good articles or reviews.

    Also visit my blog post; benefits of chiropractic care for athletes

  13. I think the admin of this website is genuinely working hard for his site, because here every material is
    quality based material.

    My webpage ... lindsey vonn knee surgery

  14. Hi there colleagues, its fantastic piece of writing regarding educationand
    fully defined, keep it up all the time.

    Here is my site ... Sushi Restaurant

  15. I've been exploring for a bit for any high quality articles or weblog posts in this kind of house . Exploring in Yahoo I at last stumbled upon this web site. Reading this info So i'm satisfied to show that
    I have a very just right uncanny feeling I came upon exactly
    what I needed. I such a lot for sure will make sure to don?
    t omit this site and provides it a glance on a continuing basis.

    Here is my page :: spondylolisthesis Fusion surgery

  16. Hello to all, how is all, I think every one is getting more from
    this web page, and your views are nice for new viewers.

    Feel free to visit my web page ... personal injury attorney

  17. Hi, i think that i saw you visited my site thus i came to “return
    the favor”.I am attempting to find things to enhance my web
    site!I suppose its ok to use a few of your ideas!!

    my web page - group golf lessons tampa

  18. Hi, this weekend is good in favor of me, as this point
    in time i am reading this great educational paragraph here at my house.

    Look at my blog: Chiropractor

  19. I have read some good stuff here. Definitely value
    bookmarking for revisiting. I surprise how so much attempt you
    set to create such a fantastic informative website.

    Also visit my blog post

  20. Today, I went to the beach with my children.
    I found a sea shell and gave it to my 4 year old daughter and said "You can hear the ocean if you put this to your ear." She placed the shell to her
    ear and screamed. There was a hermit crab inside and it pinched her ear.
    She never wants to go back! LoL I know this is completely off topic but I had to tell someone!

    Look into my webpage :: scapular pain shoulder dislocation

  21. What i do not realize is in reality how you're not really a lot more smartly-preferred than you might be now. You are so intelligent. You understand thus considerably when it comes to this subject, produced me for my part imagine it from numerous numerous angles. Its like men and women are not interested except it's something
    to do with Woman gaga! Your personal stuffs outstanding.
    At all times take care of it up!

    Look into my site :: Orlando Sushi

  22. My relatives all the time say that I am wasting my time here at web,
    however I know I am getting know-how all the time by reading
    such fastidious content.

    my web page - Hunters Creek Sushi

  23. Wow, this paragraph is pleasant, my younger sister is analyzing such things,
    thus I am going to let know her.

    My web-site; rotator cuff tendonitis

  24. Farmacia On Line, not just March 22nd, but hey, it's got to be kidding me. Row 11-15: Sl st into next dc and into ch-1 space of shell, dc, ch 3, sc in dc, hdc, sc.

    Look into my web page ::

  25. Can I simply just say what a relief to discover an
    individual who genuinely understands what they are discussing online.

    You definitely realize how to bring a problem to light
    and make it important. More and more people must read this and understand this side of
    the story. I was surprised you aren't more popular because you certainly have the gift.

    Here is my web site; retaurants in ventnor new jersey

  26. Those emails all ask the same thing: Would you consider
    using a" Female farmacia on line"? OfficeTight Office
    integration, complete with barcodes and any
    other relevant information.

    Also visit my page -

  27. We have maintained our brand image and have also maintained a long list of animal products, including impotence pill farmacia on line, restored
    sexual function can create issues of fidelity that previously
    had been moot. farmacia on line will work to generate a few sample cards via a
    third-party website to get a grip on realty. To
    start with, HTC has turned Watch loose in the UK.

    Look at my web-site - [link] ()

  28. It was a great information and Its really worth enough reading it. The author did an mind blowing work by describing each and every concept in detail. Thanks for such an informative post. Please keep up your good work.
    Engineering Colleges In Chennai, Nautical Science Colleges In Chennai


What is your opinion about this post ?