What is meant by "opportunity risk"?

Opportunity risk refers to the potential loss that an organization or individual may face when they fail to capitalize on advantageous opportunities. This type of risk underscores the importance of making timely and informed decisions to seize chances that could lead to benefits, such as increased revenue, market share, or competitive advantage.

In the context of operational risk management, recognizing opportunity risk is essential because it highlights not only the need for risk assessment in avoiding potential losses but also the necessity of strategic planning and proactive decision-making to leverage favorable situations. Organizations need to balance between cautionary strategies and seizing potential gains, emphasizing that the risk of not pursuing a beneficial opportunity can sometimes outweigh the risks associated with taking action.

Thus, when one considers the essence of opportunity risk, it revolves around the cost of inaction in situations where the potential for positive outcomes exists.