A near-miss is an operational breakdown that exposes a control vulnerability but is resolved before causing a direct financial loss. For example, if a processing clerk enters an incorrect wire transfer amount but the system’s payment gateway blocks the transaction due to an account mismatch, the control breakdown is real, but the realized financial loss is zero.

[Control Breakdown Occurs] ---> [Fortuitous Process Block] ---> [Near-Miss Log Generated]

Organizations must establish clear, non-punitive reporting channels for near-miss events. Because these incidents do not impact financial line items, they provide valuable data on control performance without the accounting complexity of realized losses. Tracking near-miss trends allows risk teams to identify escalating system vulnerabilities and remediate process weaknesses before they result in actual financial damage.