Operational risk capital represents the buffer required under regulatory frameworks like Basel III to protect against operational losses such as fraud, system failures, legal claims, and business disruption. Calculation methods include the Basic Indicator Approach, Standardized Approach, and Advanced Measurement Approach using internal loss data and scenario analysis. For example, a bank experiencing significant trading errors might be required to hold additional capital against operational risk in its trading operations. This capital requirement incentivizes institutions to improve controls, processes, and risk management practices to reduce their operational risk exposure.