Operational risk is the possibility of financial losses occurring due to failures or insufficiencies in processes, people, internal systems, technology, and in the presence of unforeseen external events.

This definition includes legal risk, but excludes systematic and reputational risks, and does not take into account losses caused by changes in the political, economic and social environment. The losses associated with this type of risk can originate from failures in processes, technology, people's actions, and also due to the occurrence of external extreme events.[1]​.

To evaluate Operational Risk, two variables are generally taken into account:

Three methodologies are usually distinguished for calculating Operational Risk:

In the case of the basic indicator method, the calculation of the capital requirement is based on a proportion set by Basel (alpha factor = 15%) of the average of the last three years of positive annual gross income (which allows the volume of operations to be estimated).

KBIA = [Σ(GI1…n x α)]/n.

Where:.

Under the standard methodology, banks' activities are divided into business lines. The gross income of each line of business is calculated and each of these is multiplied by a factor (beta) that estimates the exposure that each line of business has and allows the capital provision for each line of business to be calculated (corporate finance: 18%; negotiation and sales: 18%; retail banking: 12%, commercial banking: 12%; payments and settlement: 18%; agency services: 15%; asset management: 12%; intermediation retail: 12%). In the end, the total capital requirement is the sum of the requirements of each line.

Finally, with the advanced measurement approach (EMA), through mechanisms that especially use the estimation of probability distribution functions, a measurement of the required capital is achieved that is much more adjusted to the particular situation of each entity.

– General rules for the application of the general law on institutions of the financial system, Cap. V On Operational Risk Management, Superintendency of Banks and Insurance of Ecuador, 2005.

– Basel Committee, The New Basel Capital Accord, Basel, 2001.

– David Pacheco López, Operational risk: Concepts and Measurements, Superintendency of Banks and Financial Institutions, Chile 2009.

– José Ignacio Giménez Martínez, System for Quantitative Measurement of Operational Risk in Financial Entities, Universidad Pontificia Comillas, Madrid 2006.