#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.
ExplanationOperational risk involves losses from internal processes, people, systems, or external events.
#2
What is the primary responsibility of a supervisor in operational risk management?
To identify and mitigate operational risks.
ExplanationSupervisors are responsible for identifying and mitigating operational risks in risk management.
#3
Which of the following is a primary objective of implementing operational risk management (ORM) in financial institutions?
Identifying and mitigating potential risks.
ExplanationThe primary objective of ORM is identifying and mitigating potential risks in financial institutions.
#4
What is the role of scenario analysis in operational risk management?
To assess the potential impact of various risk events.
ExplanationScenario analysis assesses the potential impact of various risk events in operational risk management.
#5
What is the purpose of conducting a root cause analysis in operational risk management?
To identify the underlying causes of risk events.
ExplanationRoot cause analysis identifies the underlying causes of risk events in operational risk management.
#6
Which of the following is NOT a typical source of operational risk?
Macroeconomic factors
ExplanationMacroeconomic factors are not typical sources of operational risk.
#7
Which of the following is NOT a component of the COSO framework for ORM?
Market risk analysis
ExplanationMarket risk analysis is not a component of the COSO framework for Operational Risk Management (ORM).
#8
What is a common technique used in operational risk management to evaluate the potential impact and likelihood of risk events?
Monte Carlo simulation
ExplanationMonte Carlo simulation is a common technique to evaluate the impact and likelihood of operational risk events.
#9
Which of the following is a common challenge faced by supervisors in operational risk management?
Difficulty in quantifying operational risks.
ExplanationSupervisors often face difficulty in quantifying operational risks.
#10
What is the purpose of a business impact analysis (BIA) in operational risk management?
To identify critical business processes and their vulnerabilities.
ExplanationBIA identifies critical business processes and vulnerabilities in operational risk management.
#11
What is the significance of a risk appetite framework in operational risk management?
To establish limits on acceptable risk exposure.
ExplanationA risk appetite framework establishes limits on acceptable risk exposure in operational risk management.
#12
What is the primary purpose of conducting risk control self-assessments (RCSAs) in operational risk management?
To evaluate the effectiveness of risk mitigation strategies.
ExplanationRCSAs evaluate the effectiveness of risk mitigation strategies in operational risk management.
#13
In the context of operational risk management, what does the acronym KRI stand for?
Key Risk Indicator
ExplanationKRI stands for Key Risk Indicator in operational risk management.
#14
What role does risk culture play in effective operational risk management?
It influences employees' attitudes and behaviors towards risk.
ExplanationRisk culture influences employees' attitudes and behaviors towards risk in operational risk management.
#15
How can a financial institution effectively manage third-party risks in operational risk management?
By conducting thorough due diligence and monitoring activities.
ExplanationEffective management of third-party risks involves thorough due diligence and monitoring activities.
#16
How does operational risk differ from credit and market risk?
Operational risk primarily involves human error and system failures.
ExplanationOperational risk primarily involves human error and system failures, distinguishing it from credit and market risk.
#17
In operational risk management, what does the term 'risk appetite' refer to?
The level of tolerance for risks within an organization.
ExplanationRisk appetite refers to the level of tolerance for risks within an organization in operational risk management.