#1
Which of the following best defines operational risk in a financial institution?
The risk of losses resulting from inadequate or failed internal processes, people, and systems or from external events.
The risk of market fluctuations affecting the institution's profitability.
The risk of cyberattacks targeting the institution's IT infrastructure.
The risk of non-compliance with regulatory requirements.
#2
What is the primary responsibility of a supervisor in operational risk management?
To ensure maximum profitability for the institution.
To identify and mitigate operational risks.
To enforce strict compliance with industry standards.
To develop new financial products and services.
#3
Which of the following is a primary objective of implementing operational risk management (ORM) in financial institutions?
Maximizing profits at all costs.
Identifying and mitigating potential risks.
Outsourcing risk management responsibilities.
Avoiding all risks completely.
#4
What is the role of scenario analysis in operational risk management?
To predict future market trends accurately.
To analyze historical financial data.
To assess the potential impact of various risk events.
To forecast interest rate fluctuations.
#5
What is the purpose of conducting a root cause analysis in operational risk management?
To allocate blame to specific individuals.
To identify the underlying causes of risk events.
To promote a blame-free organizational culture.
To estimate potential financial losses.
#6
Which of the following is NOT a typical source of operational risk?
Human error
Technological failures
Macroeconomic factors
External fraud
#7
Which of the following is NOT a component of the COSO framework for ORM?
Control environment
Risk assessment
Market risk analysis
Information and communication
#8
What is a common technique used in operational risk management to evaluate the potential impact and likelihood of risk events?
Value at Risk (VaR)
Monte Carlo simulation
Regression analysis
Profit and loss statement
#9
Which of the following is a common challenge faced by supervisors in operational risk management?
Lack of regulatory oversight.
Overestimating risk exposure.
Difficulty in quantifying operational risks.
Limited access to financial resources.
#10
What is the purpose of a business impact analysis (BIA) in operational risk management?
To evaluate the financial performance of the business.
To identify critical business processes and their vulnerabilities.
To assess customer satisfaction levels.
To optimize supply chain logistics.
#11
What is the significance of a risk appetite framework in operational risk management?
To encourage excessive risk-taking behaviors.
To establish limits on acceptable risk exposure.
To eliminate all potential risks.
To bypass regulatory requirements.
#12
What is the primary purpose of conducting risk control self-assessments (RCSAs) in operational risk management?
To transfer all risks to third-party insurers.
To evaluate the effectiveness of risk mitigation strategies.
To delegate risk management responsibilities to external consultants.
To calculate financial ratios for investment analysis.
#13
In the context of operational risk management, what does the acronym KRI stand for?
Key Regulatory Initiative
Key Risk Indicator
Knowledge Resource Inventory
Key Reconciliation Item
#14
What role does risk culture play in effective operational risk management?
It has no significant impact on risk management practices.
It influences employees' attitudes and behaviors towards risk.
It primarily focuses on short-term risk mitigation strategies.
It determines the financial performance of the institution.
#15
How can a financial institution effectively manage third-party risks in operational risk management?
By avoiding all partnerships with external entities.
By conducting thorough due diligence and monitoring activities.
By shifting all risks to the third-party entities.
By ignoring third-party risks as they are insignificant.
#16
How does operational risk differ from credit and market risk?
Operational risk focuses on technological failures only.
Operational risk primarily involves human error and system failures.
Credit and market risks are subsets of operational risk.
Operational risk is irrelevant in the financial industry.
#17
In operational risk management, what does the term 'risk appetite' refer to?
The level of tolerance for risks within an organization.
The desire to avoid all risks completely.
The willingness to take excessive risks for higher returns.
The budget allocated for risk management activities.