Operational risk is the oldest type of business risk. It has existed for as long as people have been running businesses. Think about the tremendous operational risk incurred by the London and East India trading companies as they ferried colonists and supplies from England to America in the seventeenth and eighteenth centuries. These trading companies, and others like them, would have continually red-lined any modern operational risk manager’s scale of severity.

Recently, operational risk evolved into a formalized risk class. Risk specialists have been attempting to address operational risk using the same approaches and theories as other risk classes for only a relatively short time, which might explain why one of the greatest challenges of operational risk is measurement.