CORES Loss Data Collection & Analysis 2

Question 1

Which loss data attribute is MOST critical for determining whether an event should be classified as operational risk versus credit or market risk?

Accepted Answer

Loss causation and trigger event

Answer

The root cause and trigger of the loss determines its risk category; an operational failure causing a credit loss is still classified as operational risk.

Question 2

Under the Basel Committee's Loss Data Collection guidelines, what is the recommended minimum gross loss threshold for including retail banking events in an internal loss database?

Accepted Answer

$10,000

Answer

Basel guidance suggests a €10,000 (approximately $10,000) minimum threshold for retail banking to ensure data collection is practical and material.

Question 3

A bank records a $5M fraud loss in Q1 but recovers $3M through insurance in Q3. What net loss figure should appear in the operational risk capital model?

Accepted Answer

$5M with $3M shown as a separate recovery line

Answer

Best practice requires gross loss and recoveries to be tracked separately to preserve the full picture of exposure and recovery effectiveness.

Question 4

Which method is used to combine internal loss data with external loss data to address the scarcity of high-severity tail events in internal databases?

Accepted Answer

Scaled external data integration

Answer

External loss data is typically scaled or adjusted for firm size before being blended with internal data to enrich the tail of the loss distribution.

Question 5

What does the term 'near-miss' refer to in the context of operational risk loss data collection?

Accepted Answer

An event that could have resulted in a loss but did not due to intervention or luck

Answer

Near-misses are events where a loss was avoided; capturing them provides valuable risk intelligence even though no financial loss occurred.

(CORES) Certified Operational Risk Executive Specialist Practice Test

(CORES) Certified Operational Risk Executive Specialist Practice Test

CORES Loss Data Collection & Analysis 2