What is ‘Operational Risk’. Explain the significance of Operational Risk. Discuss the methodologies used for measuring Operational Risk.

Operational risk is a critical facet within bank financial management, encompassing the potential for losses arising from inadequate or failed internal processes, people, systems, or external events. It differs from market and credit risk, focusing on the risks inherent in a bank's daily operations rather than fluctuations in financial markets or borrower defaults.

The significance of operational risk lies in its pervasive nature and potential impact on a bank's financial health, reputation, and regulatory compliance. Understanding and managing operational risk is crucial as it can lead to direct financial losses, damage to the bank's reputation, legal and regulatory penalties, and overall instability in the financial system.

Measuring operational risk involves various methodologies, each aimed at assessing and quantifying the ____ _______ ____ _________ __________.
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