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 operational risk loss event type would capture fines paid for mis-selling investment products to retail clients?
Answer: Clients, Products & Business Practices
Mis-selling fines arise from failures in product suitability and fiduciary duties, which fall under Clients, Products & Business Practices.
What is the primary purpose of a KRI 'amber' (yellow) threshold?
Answer: Trigger enhanced monitoring and proactive management review before breach
An amber threshold is an early-warning zone that prompts heightened attention and proactive steps before risk exceeds the red threshold.
Which of the following best describes 'tail risk' in the context of operational risk loss distributions?
Answer: Low-frequency, high-severity events in the extreme right tail of the distribution
Tail risk refers to rare but catastrophic events that populate the far right tail of the aggregate loss distribution, requiring separate capital buffers.
An employee at a financial firm intentionally overrides system controls to approve their own expense reimbursements. This event is classified under:
Answer: Internal Fraud
Intentional override of controls by an employee for personal financial gain is a textbook Internal Fraud operational risk event.
Which data source is typically used to supplement internal loss data when a firm lacks sufficient historical data for rare operational risk events?
Answer: External loss databases such as ORX or SAS OpRisk
External loss databases like ORX aggregate industry-wide operational loss data, providing benchmarks for low-frequency, high-severity events.
A rapidly rising 'employee overtime hours' KRI most likely signals emerging risk in which category?
Answer: Employment Practices & Workplace Safety
Excessive overtime increases fatigue-related errors, burnout, and potential labor law violations, directly signaling Employment Practices & Workplace Safety risk.
In operational risk management, 'scenario analysis' is primarily used to:
Answer: Estimate potential losses from rare but plausible extreme events
Scenario analysis explores hypothetical extreme but plausible events to estimate potential operational losses beyond what historical data captures.