Operational risk encompasses which of the following?

Operational risk encompasses the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. This definition underlines that operational risk is primarily related to the operational capabilities of an organization and can arise from various factors, including human errors, system failures, fraud, or natural disasters.

This broad scope distinguishes operational risk from other types of risks such as market risk, which deals specifically with fluctuations in market prices; regulatory risk, which pertains to the potential impacts of regulatory changes; and credit risk, which involves the possibility of default on debt obligations. By understanding operational risk in this comprehensive manner, organizations can better identify vulnerabilities and implement measures to mitigate such risks effectively.