Which of the following situations exemplifies operational risk?

Operational risk refers to the potential for loss resulting from inadequate or failed internal processes, people, systems, or external events. In this context, the situation involving a failure in the internal IT system causing service disruption exemplifies operational risk. Such a failure directly impacts the organization's ability to deliver services, maintain operational efficiency, and uphold customer confidence, all of which are critical components of operational performance.

The reason this situation is categorized as operational risk is that it fundamentally involves the internal workings of an organization. When IT systems fail, it can lead to various operational challenges, including delayed service delivery, loss of data, or even complete shutdowns of service channels, which can have immediate financial and reputational repercussions.

In contrast, a sudden financial market collapse reflects market risk, as it relates to changes in market conditions that can affect an organization's financial position. Changes in government regulations affect compliance and strategic planning, categorizing it under regulatory risk or compliance risk. An increase in product prices due to inflation pertains to economic risk, which is related to external economic factors rather than internal operational mechanics. Therefore, the correct identification of operational risk in this example highlights the importance of understanding internal vulnerabilities within an organization.