Speaker 1: Welcome to governance risk and compliance courses and today we will be discussing about the operational risk. Operational risk is one of the categories of broader risk and the definition of operational risk includes three and four main components which we will be discussing right now. Before that if you are new to this channel I would request you to subscribe this channel so that you will be getting the GRC related conceptual videos in future. So operational risk is basically a risk of loss resulting from inadequate or failed internal processes, information systems, internal controls and people. Every organization has some processes defined by the management and board of directors and those processes relates to different departments like for example finance department, human resource department, compliance department, risk management department and so on. Processes are basically defined to ensure that all the employees perform the daily routine tasks according to the defined processes and which are laid down in the procedural documents or in SOPs. So if for example the employees are not following the processes which are defined by management then it means that internal processes are failed or operational and losses are incurring. Similarly if the information system or core application system of an organization is corrupted or if the errors come in the information system then it is also an operational loss because operations of the company will be disrupted and causing the losses in or delays in the manufacturing of the products or delivery of the services or the loss of data. Further internal controls and people are also the components of the operational risk and internal controls you can link with the internal processes because every process has some defined controls. So if the process is failed it means that the controls were not applied appropriately. So controlled absence is also one of the examples of the operational risk. Further people loss will occur in the situations where the senior management or critical employees of the organization are resigning from the organization or institution on frequent basis and when the critical employees or skilled employees especially and leave the organization or resign from the organizations on frequent basis it means that the operations are disrupted because unskilled or semi-skilled level resources cannot handle the critical type of tasks and activities on daily basis. So critical employees basically are considered for operational risk perspective but obviously lower level management or lower level staff are also crucial and important and they can also cause operational losses if they resign. You can think of a union in an organization or the labor union working in a specific factory. If all the labor union or if all the employees working in the factory resign then the factory will be shut down for a few days but ultimately causing the operational losses of significant amount to the organization. So examples include risk of fraud by an employee for example if an employee of the organization commits any financial fraud or other types of fraud then this is the operational risk because it means that the processes are not followed and controls are lapsed. That's why employee got an opportunity where he or she committed the fraud. Other example as I earlier said that the resignation of skilled human resource or skilled employees of the company is also an example of the operational risk. So this was a brief conceptual discussion today and we discussed the concept of operational risk. Operational risk again is one of the core area of the overall enterprise risk management or risk management function. So this was the video for today if you have any questions regarding the operational risk or the discussion we had in this video you can ask in the comment section below I would respond to your queries and if you have not subscribed the channel so do subscribe and the channel and thank you for watching