Operational definition

An operational definition is a result of the process of operationalization and is used to define something (e.g. a variable, term, or object) in terms of a process (or set of validation tests) needed to determine its existence, duration, and quantity. Since the degree of operationalization can vary itself, it can result in a more or less operational definition. The procedures included in definitions should be repeatable by anyone or at least by peers.

An example of operational definition of the term weight of an object, operationalized to a degree, would be the following: "weight is the numbers that appear when that object is placed on a weighing scale". According to it, the weight can be any of the numbers shown on the scale after, including the very moment the object is put on it. Clearly, the inclusion of the moment when one can start reading the numbers on the scale would make it more fully an operational definition. Nonetheless, it is still in contrast to those purely theoretical definitions.

Operational risk

Operational risk is "the risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses". This definition, adopted by the European union Solvency II Directive for insurers, is a variation from that adopted in the Basel II regulations for banks. In October 2014, the Basel Committee on Banking Supervision proposed a revision to its operational risk capital framework that sets out a new standardized approach to replace the basic indicator approach and the standardized approach for calculating operational risk capital.

It can also include other classes of risk, such as fraud, security, privacy protection, legal risks, physical (e.g. infrastructure shutdown) or environmental risks.

Operational risk is a broad discipline, close to good management and quality management.

In similar fashion, operational risks affect client satisfaction, reputation and shareholder value, all while increasing business volatility.