The risk of loss due to errors by people or flaws in processes. Operational risk also includes instances of fraud.

Example:

You assume your spouse will be making the payments on a monthly utility bill.

Downside Scenario:

Your spouse assumes you are making the payment, and you suffer a late payment fee.

Upside Scenario:

Your assumption is correct. The bill is paid, and you are able to fit in a round of golf on a beautiful day.

The infamous Enron debacle was an operational risk realization on a massive scale. Fraud initiated at the highest level of the firm cost employees billions of dollars in salaries as well as pension and health benefits.

Related terms:

People Risk

The risk of loss or damage due to people's acts of commission or omission