Define "systemic risk" in a business context.

The definition of "systemic risk" in a business context refers specifically to the potential for a failure that can affect an entire system or market rather than just a single entity. This type of risk arises when a disturbance or failure in one part of a financial system can lead to widespread repercussions for other parts. For example, the inability of one financial institution to meet its obligations could lead to a loss of confidence in other institutions, ultimately affecting the entire financial market and the economy.

This understanding is crucial in operational risk management, as systemic risk emphasizes the interconnectedness of organizations within an industry, illustrating how the failure of a key player can trigger a cascading effect on others. It reflects on the importance of monitoring not just isolated risks, but also the broader implications that collective vulnerabilities and dependencies within a market structure may pose.

In contrast, the other options pertain to narrower definitions of risk that are more localized and do not encompass the broader implications of systemic mechanisms that can lead to widespread failure, thereby distinguishing systemic risk from company-specific or data-related risks.