What is Operational Risk?
Operational risk is the potential for loss resulting from failures in internal processes, systems, people, or external events. Unlike financial or market risks, operational risk arises from day-to-day business activities and can affect any organization, regardless of industry or size.
It is a core component of enterprise risk management (ERM) and is closely monitored by regulators, especially in sectors like banking, insurance, and healthcare.
Why Operational Risk Matters
Managing operational risk is critical because it helps organizations:
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Prevent financial losses caused by system failures or human errors
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Ensure compliance with regulatory requirements (e.g., Basel III in banking)
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Protect reputation by avoiding disruptions, fraud, or misconduct
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Improve resilience against external shocks such as natural disasters or cyberattacks
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Support long-term sustainability through strong internal controls
Common Types of Operational Risk
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Process Risk – Inefficient or flawed business processes
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People Risk – Human error, lack of training, or fraud
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Technology/System Risk – IT failures, cybersecurity breaches, or outdated systems
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Legal & Compliance Risk – Failing to meet laws, contracts, or regulatory requirements
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External Event Risk – Natural disasters, supply chain disruptions, or geopolitical issues
Example of Operational Risk in Action
A global bank suffers a major system outage that prevents customers from accessing online services for several hours. This leads to financial losses, customer dissatisfaction, and scrutiny from regulators—illustrating operational risk from technology failure.
Operational Risk vs. Compliance Risk
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Operational Risk – Broader, covering internal failures and external events that disrupt business operations.
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Compliance Risk – More specific, relating to violations of laws, regulations, or policies.
How VComply Can Help
VComply helps organizations manage operational risk by:
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Automating risk assessments and control testing
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Mapping operational risks to compliance and governance requirements
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Tracking incidents, root causes, and corrective actions
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Providing real-time dashboards to monitor risk exposure
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Enhancing accountability through assigned ownership of risks and controls
With VComply, organizations can proactively manage operational risk, reduce disruptions, and strengthen business resilience