Series 99 Operational Risk & Controls

Question 1

What is operational risk?

Accepted Answer

Failure in operations

Answer

Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people, and systems, or from external events. This can include errors in transaction processing, system failures, human mistakes, fraud, or disruptions from natural disasters. Managing operational risk is crucial for a firm's stability and ability to deliver services effectively.

Question 2

What is a common internal control?

Accepted Answer

Separation of duties

Answer

Separation of duties is a fundamental internal control designed to prevent fraud and errors by distributing critical functions among different individuals. This means that no single person has complete control over a transaction from start to finish. For example, the person who authorizes a payment should not be the same person who records it or reconciles the bank statement, reducing the opportunity for misconduct.

Question 3

Why perform audits?

Accepted Answer

Detect and verify

Answer

Audits are systematic examinations of an organization's financial records, operations, and compliance with regulations. Their primary purpose is to detect errors, fraud, or non-compliance, and to verify the accuracy and reliability of information. Audits provide an independent assessment, offering assurance to stakeholders that processes are functioning correctly and financial statements are fairly presented.

Question 4

What reduces system risk?

Accepted Answer

Backups

Answer

Backups are critical for reducing system risk by creating copies of data and system configurations. In the event of a system failure, data corruption, cyberattack, or disaster, backups allow an organization to restore its information and operations, minimizing downtime and data loss. Regular and secure backups are a cornerstone of any robust disaster recovery and business continuity plan.

Question 5

What is risk mitigation?

Accepted Answer

Reduce impact

Answer

Risk mitigation refers to the strategies and actions taken to reduce the likelihood or impact of a potential risk event. It involves identifying risks, assessing their potential consequences, and implementing controls or plans to lessen their severity or probability. The goal is to minimize the negative effects that risks could have on an organization's operations, finances, or reputation.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Operational Risk & Controls