In late January, a computer worm called Sapphire (a.k.a., "Slammer") spread quickly throughout the Internet and overwhelmed business computers with data. It was a nightmare for business operations, shutting down ATMs, clogging online ticketing systems and blacking out an emergency call center in Seattle. It highlighted a fear by corporate managers and directors everywhere of operational risk. Operational failures such as those caused by Sapphire can result in huge financial losses and a damaged corporate reputation, which could put an end to any manager's career.
Operational risk is commonly defined as the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. Clearly, worms are external events; but many internal process failures can create situations with similar results. Whether it's a senior manager perpetrating fraud or an internal system or process failure that results in a loss of customer information, serious consequences can result.
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