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Operational Risk

  1. Rodney Coleman

Published Online: 14 JAN 2011

DOI: 10.1002/9780470400531.eorms0591

Wiley Encyclopedia of Operations Research and Management Science

Wiley Encyclopedia of Operations Research and Management Science

How to Cite

Coleman, R. 2011. Operational Risk. Wiley Encyclopedia of Operations Research and Management Science. .

Author Information

  1. Imperial College London, Department of Mathematics, London, UK

Publication History

  1. Published Online: 14 JAN 2011

Abstract

Operational risk is the business risk of loss resulting from inadequate or failed internal processes, people, systems, or from external events. Fraud, accounting errors, equipment failure or theft, mis-selling, product flaws, claims for unfair dismissal: all are business costs not attributable to a business's strategic aims. Serious operational risk events also occur beyond a purely business setting: for example, in hospitals, manufacturing plants, ship building, nuclear power generation, offshore drilling, warfare, and from disruption caused by natural disasters. The methods of management, monitoring, modeling, measuring, and mitigation of operational risk are reviewed, illustrated with data taken mainly from banking and insurance.

Keywords:

  • business failure;
  • environmental and technological disasters;
  • banking supervision;
  • operations risk management;
  • statistical analysis of loss data