Operational risk refers to the risk of losses or damage to the bank's reputation resulting from inadequate or failed internal processes, people, systems, or external events.

It is a type of business risk that arises from the day-to-day operations of an organization.

Operational risk includes a wide range of factors such as human errors, IT system failures, fraud, legal and regulatory compliance issues, supply chain disruption, and external incidents like natural disasters or cyber attacks.

Operational risks can have significant and wide ranging impacts on an organization, including financial losses, reputational damage, legal, or regulatory penalties, and operational disruption.