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:
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The variability of demand for products
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The variability of prices for supplies
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The risk of product obsolescence
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The risk of equipment obsolescence
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The risk associated with changes in the management team
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The risk of failed internal processes
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The risk of incompetent personnel
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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.