CRA Operational Risk Events & KRIs 2

Question 1

Which Basel II operational risk event category covers losses from unauthorized trading activities?

Accepted Answer

Internal Fraud

Answer

Unauthorized trading, such as rogue trading, falls under Internal Fraud because it involves intentional misuse of authority by an employee.

Question 2

A bank's KRI shows a spike in failed trade settlements over three consecutive days. What is the primary operational risk concern?

Accepted Answer

Execution, Delivery & Process Management failures

Answer

Repeated failed settlements signal process breakdowns in trade execution and lifecycle management, a core Execution, Delivery & Process Management event.

Question 3

Which characteristic distinguishes a Key Risk Indicator (KRI) from a Key Performance Indicator (KPI)?

Accepted Answer

KRIs signal potential risk exposure while KPIs measure operational efficiency

Answer

KRIs are forward-looking signals of emerging risk, whereas KPIs measure how well a process is performing currently or historically.

Question 4

A fire destroys a firm's primary data center. Under Basel II event categories, this loss is classified as:

Accepted Answer

Damage to Physical Assets

Answer

Physical destruction of assets from natural or man-made disasters is categorized as Damage to Physical Assets under Basel II.

Question 5

An organization tracks 'number of unresolved audit findings' as a KRI. This metric primarily signals risk in which area?

Accepted Answer

Control environment effectiveness

Answer

Unresolved audit findings indicate weaknesses in the internal control environment, a direct operational risk signal.

(CRA) Certified Risk Analyst Practice Test

(CRA) Certified Risk Analyst Practice Test

CRA Operational Risk Events & KRIs 2