Month End Glossary

Operational Risk

Operational risk refers to the potential loss resulting from inadequate or failed internal processes, people, systems, or external events.

Operational risk signifies the possibility of losses resulting from failures in internal processes, human errors, system deficiencies, or external events. For example, a breakdown in communications within a team could lead to a missed critical deadline, showcasing the people-related aspect of operational risk. Similarly, the failure of IT systems during a critical period, like year-end financial close, exemplifies the system-related facet of operational risk.

This type of risk is inherent in all organizations and represents challenges specific to their operation procedures. Companies mitigate operational risk by implementing robust control measures, such as checklists and automated monitoring tools like those provided by Easy Month End. By identifying and addressing the complexities in their processes, companies enhance their abilities to reduce susceptibilities to potential disruptions.

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