Exchange Operational Risk

Definition ∞ Exchange operational risk refers to the potential for losses resulting from inadequate or failed internal processes, systems, human errors, or external events within a cryptocurrency exchange. This encompasses a broad range of issues, including system outages, data breaches, software bugs, or errors in trade execution. Such risks can severely impact an exchange’s liquidity, reputation, and the security of user funds. Effective risk management protocols are essential for mitigating these vulnerabilities.
Context ∞ The discussion surrounding exchange operational risk consistently highlights the imperative for robust security measures, resilient infrastructure, and comprehensive disaster recovery plans. News often covers incidents where operational failures have led to significant financial losses or service interruptions. Continuous investment in technology and personnel training is vital for exchanges to maintain trust and operational integrity.