Operational Risk is the risk of loss due to failures in internal processes, systems, human errors, or external events.
Operational Risk arises from day-to-day business operations and can affect any organization, especially banks and financial institutions. It includes risks from system breakdowns, fraud, human mistakes, or external disruptions.
In India, financial institutions manage operational risk under guidelines from the Reserve Bank of India and global standards like Basel norms.
"If a bank’s system fails during a transaction, causing incorrect transfers, it is an operational risk."