operational Risk Management 317 Ta b L E 29.3 Financial Operational risk in financial and industrial companies industrial Errors are mostly due to people reaching their physical limits. People are working in relatively simple relationships and the environment is highly manageable. Loss prevention is mainly concerned with physical safety, equipment protection and avoiding accidents. Loss prevention is aimed at avoiding physical harm to people or equipment and/or the manufacture of faulty goods (scrap). The main incentive for making deliberate mistakes is reducing effort or (possibly) sabotage. Risk management is not central to operations, although the aim is to avoid disruption to manufacturing processes. Errors mostly arise when people reach their mental limits. Systems are highly complex and widely distributed and the environment is only partly manageable. Loss prevention is concerned with security of value and assets. Loss prevention is aimed at avoiding financial loss. The main incentive for committing mistakes is personal financial gain or self-interest. Risk management is a key skill in financial services and has central importance to the organization. Developments in operational risk Before considering developments in operational risks, it is worth noting that concerns about operational risks are universal in all organizations. Although the banks and other financial institutions may have a specific approach to operational risk, the issues that are being considered are the same issues that affect all other types of organizations in the public, private and third sectors. (The third sector refers to not-for-profit organizations, including charities, membership and voluntary bodies.) Although the issues are the same, the approach in banks and other financial institutions can be different. In a non-financial institution, the questions related to operational risk may well be: `What is the value of my assets, how do I protect them and to what extent and value (or limit of indemnity) do I need to purchase insurance?' In the financial sector, the questions are more likely to be: `What are the