Operating risk definition
/What is Operating Risk?
Operating risk is the level of uncertainty associated with the core operations of a business. There are a number of possible causes of operating risk, including the following:
The variability of demand for products
The variability of prices for supplies
The risk of product obsolescence
The risk of equipment obsolescence
The risk associated with changes in the management team
The risk of failed internal processes
The risk of incompetent personnel
The risk of employee fraud
Operating risk can be mitigated to some extent by developing contingency plans for those scenarios that have a higher probability of occurrence.
Operating risk does not include any risks associated with the financing of a business.