A type of risk that reflects deficiencies in an entity’s internal controls or systems, flawed processes, human error or management failures that lead to disruptions in, or discontinuation to, its operations and as a result unexpected financial losses. This risk constitute the probability that an entity faces difficulties or deficiencies while carrying out its daily operational activities that come at the center of its business/ business model/ value proposition, etc. Operational risk relates to both internal and external events/ sources.
It is abbreviated as op risk.
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