CORES Operational Risk Identification & Assessment

Question 1

What is the primary objective of operational risk identification?

Accepted Answer

To identify, assess, and manage potential threats to operations

Answer

The primary objective of operational risk identification is to proactively pinpoint potential threats that could disrupt an organization's day-to-day activities. This involves systematically identifying, assessing, and subsequently managing these risks to prevent negative impacts on operations, reputation, and financial stability. It is a foundational step in effective risk management.

Question 2

Which of the following best describes operational risk?

Accepted Answer

Risk arising from internal failures and external disruptions

Answer

Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. Unlike financial or strategic risks, it focuses on the day-to-day functioning of an organization. This includes issues like human error, system failures, process breakdowns, and external disruptions such as natural disasters or cyberattacks.

Question 3

Which tool is commonly used for risk identification?

Accepted Answer

Risk Control Self-Assessment (RCSA)

Answer

Risk Control Self-Assessment (RCSA) is a widely used tool for risk identification where management and staff directly assess risks and the effectiveness of controls within their own business units. This collaborative approach helps to identify both known and emerging risks from an internal perspective. It fosters a culture of risk awareness and ownership throughout the organization.

Question 4

What is a key step in assessing operational risk?

Accepted Answer

Estimating risk likelihood and impact

Answer

A key step in assessing operational risk involves estimating both the likelihood (probability) of a risk event occurring and the potential impact (severity) if it does. This quantitative or qualitative evaluation helps organizations understand the potential exposure to each identified risk. By understanding likelihood and impact, risks can be prioritized for mitigation efforts.

Question 5

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

Accepted Answer

IT system outage

Answer

An IT system outage is a classic example of an operational risk event because it directly impacts an organization's internal processes and systems. Such an event can disrupt business operations, lead to data loss, financial losses, and damage to reputation. It arises from failures in technology infrastructure, which falls squarely under operational risk.

(CORES) Certified Operational Risk Executive Specialist Practice Test

(CORES) Certified Operational Risk Executive Specialist Practice Test

CORES Operational Risk Identification & Assessment