What type of risk does "Operational Risk" address?

Operational risk primarily addresses the risk derived from internal process failure. This type of risk encompasses a wide range of potential issues that can arise from inadequate or failed internal processes, systems, and people, or from external events. It includes risks resulting from operational inefficiencies, technological failures, human errors, fraud, and disruptions caused by external events, such as natural disasters or terrorism.

Operational risk can significantly impact an organization’s operational capacity and overall performance, making it crucial for entities to implement effective risk management strategies. Such strategies often involve establishing robust processes, ensuring staff training, and integrating technology properly, all aimed at minimizing the likelihood and impact of operational failures.

The other options describe different categories of risk. For instance, customer interaction risks relate to customer service and experience, financial fluctuations pertain to market and financial risks, and compliance penalties are linked to legal and regulatory risks, none of which directly address the core concerns of operational risk.