<h2>Operational Risk</h2>
<p><strong>Operational risk</strong> is a category of risk that arises from the failure of internal processes, people, or systems, or from external events. It's a broad term that encompasses various types of risks, such as human error, technological failures, or external events like natural disasters or cyber attacks.</p>

<h2>How It Works</h2>
<p>Operational risk can manifest in many ways and impact different aspects of a business. Here are some key areas where operational risk can occur:</p>
<ul>
  <li><strong>People</strong>: This includes errors or fraud by employees, as well as the loss of key personnel.</li>
  <li><strong>Processes</strong>: Inefficient or ineffective internal processes can lead to errors, delays, or even losses.</li>
  <li><strong>Systems</strong>: Failures in technology systems, such as software glitches or hardware malfunctions, can disrupt operations.</li>
  <li><strong>External Events</strong>: Natural disasters, cyber attacks, or changes in laws and regulations can all pose operational risks.</li>
</ul>

<h2>Why It Matters for Traders</h2>
<p>For traders, operational risk can have significant impacts. Here's why it matters:</p>
<ul>
  <li><strong>Financial Loss</strong>: Operational failures can lead to direct financial losses, such as those incurred due to errors in trading or settlement processes.</li>
  <li><strong>Reputation Damage</strong>: Operational issues can harm a broker's reputation, leading to a loss of clients and potential future business.</li>
  <li><strong>Regulatory Compliance</strong>: Operational risks can also lead to regulatory issues if a broker fails to meet its obligations, such as those related to client funds or reporting.</li>
</ul>

<h2>Example</h2>
<p>In 2012, a software glitch at Knight Capital, a U.S. brokerage firm, led to a trading error that resulted in a loss of $440 million in just 45 minutes. This is a stark example of how operational risk can lead to significant financial losses.</p>

<h2>Key Takeaways</h2>
<ul>
  <li>Operational risk is a broad category that encompasses various types of risks, from human error to external events.</li>
  <li>For traders, operational risk can lead to financial losses, reputation damage, and regulatory issues.</li>
  <li>Effective risk management involves identifying and mitigating operational risks, such as through robust internal processes, reliable technology systems, and adequate insurance.</li>
  <li>Traders can use tools like MetaTrader 5 to help manage operational risks, for example by automating trading processes and providing real-time market data.</li>
</ul>