In the recent years, as competition in the banking sector has intensified and banking operations have become extensively automated, the issue of operational risk has been attracting increasingly more attention. Operational risk is defined as the risk of direct or indirect losses resulting from inadequate or unreliable business processes, systems, workforce - or from external factors. The definition includes legal risk, but does not cover strategic risk or adverse effect on reputation. Judging from the operational problems recently experienced by many financial institutions, there exists a need to develop modern methods of managing this kind of risk. It would help protect and enhance the value of the institution, maintain a stable client base and contribute to building up competitive advantage. By developing a methodology of operational risk and including this category in its general risk measure, an institution can help those involved understand it better, sensitise them to potential threats, improve the decision-making process, raise the efficiency of capital allocation and finally reduce the probability of errors. In his paper, the author presents the key problems of operational risk management. These include, among others, the identification of key risks and their basic factors, the case of risk measurement requiring an estimate of probability of a loss and its amount, the issue of monitoring and control as well as the design of principles and procedures. The role of an appropriate internal control system in assisting risk management has also been discussed. Moreover, the role of banking supervision as promoter of best practice has been highlighted. Finally, the author presents the latest proposals for the calculation of new principles of capital adequacy, which have been presented to the banking sector for consultation. The Basle Committee proposals of January 2001 indicate the need to tie up operational risk with appropriate capital levels, and present three calculation methods, i.e. the basic index method, the standard method and the internal measurement method.