What is Operational Risk?

Operational Risk is defined as the risk of loss resulting from inadequate or failed processes, people, and systems or from external events. The definition includes legal risk, which is the risk of loss resulting from failure to comply with laws as well as prudent ethical standards and contractual obligations. It also includes exposure to litigation from all aspects of a company's activities.

What is Operational Risk Management?

Operational Risk Management (ORM) is the oversight of many forms of day-to-day operational risk including the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. Neither Operational Risk nor Operational Risk Management includes market risk or credit risk.