Sample Essay on Operational Risk

Operational risks can generally be defined as the losses that arise when certain responsibilities and tasks are neglected in the process of carrying out business activities. Such neglect could originate among employees or in systems, processes, and external factors (Lovejoy, p1). External factors include economy, weather, and suppliers, among others. In relation to e-commerce, operational risks are those losses that arise from technological errors. Such technological errors include crashing of the internal service provider server, unauthorized information website access by third parties, improper integration of e-commerce systems, and the internal operational processes or databases. For example, Satvik Infotech can incur operational losses when their phone databases are not properly maintained or employees get access to vital information and misuse the information for their benefit. On the other hand, the poor economic status of a given country could also result in operational risks due to factors such as high taxation rates.

The management and exploitation of operational risks could involve various measures. Auditing, compliance, company review, checking internal accountability, and proper system maintenance are some of the measures that can be undertaken to manage operational risks within a company. Auditing involves regular assessment or appraisal of the companies’ technological system. This procedure ensures that the companies’ servers are adequately protected and off site back ups are available. Reviewing the structure of companies’ personnel also helps in mitigating operational risks. This measure involves identification of key people within the organization that ensure the smooth running of e-commerce activities within the company. Compliance as an operational risk measure involves adherence to regulations such as Solvency II and Basel II, among others (Lovejoy, p1). These regulations ensure that information systems within a company are collected, stored, analyzed, tracked, and reported, thereby solving operational risk issues. An example could involve the use of services such as those of CanadaCart.ca, which provides e-commerce solutions.

Works Cited

Lovejoy, Kristin, G. The Operational Risk Management Rules of the Road. E-Commerce Times. Web. 16 February 201