Operational Risk Events & KRIs Flashcards
7 cards from real CRA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Operational Risk Events & KRIs flashcards as text
Which Basel II operational risk event category covers losses from unauthorized trading activities?
Answer: Internal Fraud
Unauthorized trading, such as rogue trading, falls under Internal Fraud because it involves intentional misuse of authority by an employee.
A bank's KRI shows a spike in failed trade settlements over three consecutive days. What is the primary operational risk concern?
Answer: Execution, Delivery & Process Management failures
Repeated failed settlements signal process breakdowns in trade execution and lifecycle management, a core Execution, Delivery & Process Management event.
Which characteristic distinguishes a Key Risk Indicator (KRI) from a Key Performance Indicator (KPI)?
Answer: KRIs signal potential risk exposure while KPIs measure operational efficiency
KRIs are forward-looking signals of emerging risk, whereas KPIs measure how well a process is performing currently or historically.
A fire destroys a firm's primary data center. Under Basel II event categories, this loss is classified as:
Answer: Damage to Physical Assets
Physical destruction of assets from natural or man-made disasters is categorized as Damage to Physical Assets under Basel II.
An organization tracks 'number of unresolved audit findings' as a KRI. This metric primarily signals risk in which area?
Answer: Control environment effectiveness
Unresolved audit findings indicate weaknesses in the internal control environment, a direct operational risk signal.
When setting KRI thresholds, a 'red' threshold is typically defined as:
Answer: The level requiring immediate escalation and management intervention
A red (breach) threshold signals that the risk has exceeded acceptable limits and requires immediate management escalation and corrective action.
Which of the following is an example of an External Fraud operational risk event?
Answer: A hacker breaching the firm's systems to steal customer data
Cyberattacks by external parties are classified as External Fraud under Basel II operational risk event categories.