CHAPTER 27
Operational Risk
According to the definition from the Basel Committee of Banking Supervision (BCBS), operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. It includes legal risk, or potential losses resulting from lawsuits. It does not include strategic risk or reputational risk. This chapter first presents the various sources of operational risk, and then it presents the statistical techniques that are used to quantify operational risk. It is an introduction to a topic discussed in actuarial sciences and engineering (McNeil et al. 2005).
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