This lesson examines operational risk, which arises from human or technical problems, system failures, and external events. It covers the regulatory frameworks for operational risk in the US and UK financial markets.

• Definition of Operational Risk: Operational risk arises from human or technical problems and includes risks from system failures, human error, and external events . It differs from other types of financial risk in its sources and management approaches.

• Operational Risk Methodologies: Practical methodologies include Risk and Control Self Assessment (RCSA), the Basic Indicator Approach (BIA), and the Standardized Approach (SA), highlighting their role in quantifying and mitigating risk. Advanced modeling techniques like the Advanced Measurement Approach (AMA) and categorization of real-world loss events are also covered .

• Operational Risk Frameworks: The combination of regulatory theory with applied examples and assessment tools enables learners to build both conceptual understanding and practical insight. The NYU Stern course on Operational Risk in Banking and Finance is designed to help participants “get acquainted with concepts and ideas that are useful in their dealings with Operational Risk on a day-to-day basis in their groups or in their departments” .