Abstract
This chapter discusses both operational and operations risks in businesses. To analyze operational risk one needs to understand the approach to risk taken by various participants in the industry. This approach depends on the type of transactions undertaken and the nature of the business concerned. The regulatory environment that the organization operates also determines the approach adopted. Operational, as distinct from operations, risk can manifest itself in many ways. Sometimes the operational risk is not easily or immediately identifiable. In most cases an error on a transaction can and should be identified quickly and adjusted so that the loss is quantified. Within operations, for instance, a problem may be occurring only occasionally and yet is having an unseen, dramatic, and damaging effect. Operational risk could also be generated in IT, internal audit, compliance, accounting, and premises. In fact anything that curtails, disrupts or has a negative impact on a business is operational risk.
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