Why operational risk matters to a first-time founder
Operational failures can stop sales, expose customer data, create legal obligations or damage trust. Small companies are especially vulnerable when one person, supplier or system has no backup. Identifying critical dependencies early lets founders add proportionate controls before an incident threatens payroll, customers or the company’s survival.
Examples of operational risk
An online retailer depends on one employee to release supplier payments. When that employee is ill, no orders ship for four days and refunds reach ₦12 million. Documented approval access and a trained backup would reduce the likelihood and impact without requiring a large compliance team.
Common misunderstanding
Operational risk is not limited to employee mistakes or technology outages. Fraud, supplier failure, damaged premises and external disruption can qualify too. It differs from market risk, which concerns adverse market movements, although one event can create several kinds of risk and loss.
When to use it
Review operational risk before launch, major hiring, outsourcing or rapid growth, then revisit it after incidents and process changes. List critical activities, likely failures, existing controls and recovery owners. Prioritise risks by impact and likelihood, and test backups rather than assuming written plans will work.