ABSTRACT
This chapter analyses the components and nature of operational risk. The range of actual and potential activities undertaken by humans and organisations is vast, resulting in the related operational risk being equally as extensive. Risk can be described and defined in many ways, including: a situation involving exposure to danger; the possibility that something unpleasant will happen; the chance of winning; being exposed to the effects of something that could potentially happen in the future. The degree of likelihood, amongst other things, is dependent on the length of the future time period over which the risk is being considered. The longer the future time period, the greater the likelihood of the risk occurring within that period. The scope of operational risk is vast, covering literally thousands of different risks. Total risk for an organisation covers all risks that could potentially affect the achievement of the organisation’s objectives.
