Financial Risk Management Operational Risk Management 1

Question 1

According to Basel III, operational risk is defined as the risk of loss resulting from:

Accepted Answer

Inadequate or failed internal processes, people, systems, or external events

Answer

Adverse market movements in interest rates or equity prices

Answer

Credit defaults by borrowers or counterparties

Answer

Liquidity shortfalls during market stress periods

Question 2

Which of the following is an example of an internal fraud operational risk event?

Accepted Answer

A rogue trader exceeding authorized position limits to conceal losses

Answer

A client suing the bank for mis-selling a financial product

Answer

A hurricane destroying a bank's data center

Answer

A payment system failure causing delayed settlements

Question 3

The 'Standardized Approach' (SA) for operational risk capital under Basel III calculates capital based on:

Accepted Answer

Business Indicator components and an Internal Loss Multiplier

Answer

Internal loss data and scenario analysis

Answer

A fixed percentage of gross income multiplied by a beta factor per business line

Answer

VaR of the operational risk loss distribution at 99.9% confidence

Question 4

A Key Risk Indicator (KRI) in operational risk management is best described as:

Accepted Answer

A metric that provides early warning signals of increasing operational risk exposure

Answer

A threshold that triggers automatic trading halts in volatile markets

Answer

The maximum acceptable loss from a single operational event

Answer

A regulatory ratio comparing operational losses to revenue

Question 5

What is a Risk and Control Self-Assessment (RCSA)?

Accepted Answer

A structured process in which business units identify, assess, and rate their own operational risks and controls

Answer

A third-party audit of a bank's credit risk models

Answer

A regulatory examination of a bank's operational risk capital adequacy

Answer

An automated system that monitors real-time transaction anomalies

Question 6

What does 'business continuity planning' (BCP) address in operational risk management?

Accepted Answer

Ensuring critical operations can continue or quickly recover after a disruptive event

Answer

Planning for future business expansion into new markets

Answer

Continuous monitoring of credit risk limits across business lines

Answer

A plan for exiting non-core business activities to reduce operational complexity