Session 1: Understanding Operational Risk in Context

Operational risk is not a narrow technical subject; it is the risk that everyday work fails in ways that matter.

Where operational risk appears in their organisation and capture examples from operations, finance, technology, HR, procurement, customer service, and projects.

Why operational risk matters

Modern organisations rely on people, processes, systems, data, vendors, approvals, and continuity arrangements. Operational risk appears wherever normal work can fail.

Examples: delayed reconciliation, incorrect file upload, weak segregation of duties, poor patch management, vendor control gap, rushed process change.

Basel definition and scope

Operational risk = risk of loss from inadequate or failed internal processes, people and systems, or from external events. Included: legal risk. Excluded from the core definition: strategic risk and reputational risk.

Interactive check: rewrite the definition in plain language.

Cause, event, impact, and consequence

Cause = underlying weakness. Event = what happened. Impact = direct business effect. Secondary consequence = what follows afterward.

Worked example: weak maker-checker control → wrong customer batch uploaded → payments delayed → complaints and regulator attention.