Define Operational Risk.

Define Operational Risk.

• A. Market risk due to price volatility
• B. Service outages, business continuity or vendor loss
• C. Regulatory changes
• D. Reputation damage from poor CX

Answer: (B)

Operational risk is about disruptions that affect the day-to-day running of a business, especially events that impact people, processes, or systems and threaten the ability to deliver services. The description of service outages, challenges to business continuity, or loss of a key vendor best fits this idea because these issues directly interrupt operations and the delivery of services. For instance, an outage in payment processing or a vendor going down can stop or delay transactions, which is exactly what operational risk covers. Other risk areas describe different problems: market risk involves price changes in markets, regulatory risk involves new or changing rules, and reputational risk concerns damage to how customers view the business. These are related but distinct categories. In practice, mitigating operational risk involves strong internal controls, clear incident response plans, robust business continuity planning, and effective vendor risk management to reduce the impact of such disruptions.

Operational risk is about disruptions that affect the day-to-day running of a business, especially events that impact people, processes, or systems and threaten the ability to deliver services. The description of service outages, challenges to business continuity, or loss of a key vendor best fits this idea because these issues directly interrupt operations and the delivery of services. For instance, an outage in payment processing or a vendor going down can stop or delay transactions, which is exactly what operational risk covers. Other risk areas describe different problems: market risk involves price changes in markets, regulatory risk involves new or changing rules, and reputational risk concerns damage to how customers view the business. These are related but distinct categories. In practice, mitigating operational risk involves strong internal controls, clear incident response plans, robust business continuity planning, and effective vendor risk management to reduce the impact of such disruptions.