Operational risk is the exposure to legal penalties, financial forfeiture, and material loss an organization faces if it chooses unsuitable business decision(s).

Business strategies employed and weaknesses uncovered can increase operational risk. Commercial cannabis businesses that take a unique approach to operating in the marketplace, launch innovative products or services to market, or experience frequent operating abnormalities are exposed to higher operational risks.

Business Strategy

The combination of decisions and actions taken to accomplish the business objective(s) is referred to as the business strategy. The complexity in execution and risk taking included in the business strategies affect operational risk.

Identified Concerns

Identified concerns are characterized as substantiated complaints from the public, recognized operational abnormalities by employees, and identified deficiencies by regulators or auditors. Identified concerns affect operational risk depending on the implication of public harm, safe and sound operations, financial impact to the company, or reputational harm.