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Understanding Operational Risk: Definition and Key Aspects

Operational risk encompasses the potential for direct or indirect loss arising from inadequate or failed internal processes, personnel, systems, or external events. This definition also includes legal risk but specifically excludes strategic and reputational risks. It's crucial to distinguish operational risk from other types of risks, such as credit and market risk. The focus lies on internal operations and system integrity, making it critical for organizations to manage these risks effectively.

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Understanding Operational Risk: Definition and Key Aspects

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    1. Operational Risk: Definition The risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events This definition includes legal risk Strategic and reputational risk are excluded

    2. 2 Definition continued... Operational Risk is not: All risk other than credit and market Only systems & IT related New

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