Operational Risk

Fundamentals of Market Investing by Adam J. McKee

The third type of business risk is operational risk.  This risk arises when the day-to-day operations of a company fail to perform.  HSBC, for example, faced operational risk and a heavy fine when its internal anti-money laundering operations team was unable to adequately stop money laundering in Mexico.  Another way to look at operational risk is as human risk.  When people do not do what they are supposed to do (accidentally or through negligence or criminal intent), operational risk is born.

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