Read Why do business professionals choose ready-to-use KPIs? to find out the answers to these questions:
Operational risks pertain to that set of risks, which arise from an organization's operations. Some of these are- fraud risks, physical risks, environmental risks and legal risks.
Extending the definition, one gets that risk emerging from sources like 'people', 'systems', 'internal processes' and 'external happenings' is classified under the head 'operational risk'. There can be malfunctioning or failure in any/all of these components, which makes it important to use a monitoring tool. This serves the purpose of keeping things 'on track'.
Due to the very broad scope of this subset of 'risks', it is not possible for a single department to take care of the complete range. This causes the division of risks to various other operational units. In other words, different divisions are involved in dealing with risks that trouble them. For instance, HR departments are involved in taming personnel risks; IT (Information Technology) division ensures that information risks are kept to minimum.
Moving on the basics of operational risks, one deciphers that all organizations are likely to become victim of these dangers but firms belonging to banking sector have been particularly found to be at a higher risk.
This is the actual scorecard with Operational Risk Indicators and performance indicators. The performance indicators include: legal risk metrics, regulatory risk, contractual disputes, employment practices risk, environmental risk, technology risk metrics, system downtime, loss of assets, business continuity planning, human factor metrics, employee errors, employee turnover rate, breach of confidentiality, internal fraud, external risk metrics, technology provider failure, system security, theft and fraud.
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