What is operational risk? A) Risk arising from market fluctuations
B) Risk arising from internal processes, people, and systems
C) Risk related to credit defaults
D) Risk associated with regulatory changes
Answer: B) Risk arising from internal processes, people, and systems
Which of the following is NOT a component of operational risk? A) Process risk
B) People risk
C) Market risk
D) System risk
Answer: C) Market risk
What is the main goal of operational risk management? A) To eliminate all operational risks
B) To minimize the impact of operational risks on the organization
C) To speculate on financial markets
D) To increase investment returns
Answer: B) To minimize the impact of operational risks on the organization
Which of the following best describes “process risk”? A) Risk arising from external market conditions
B) Risk arising from failures or inefficiencies in business processes
C) Risk related to credit defaults
D) Risk of natural disasters
Answer: B) Risk arising from failures or inefficiencies in business processes
What does “people risk” refer to in the context of operational risk? A) Risk related to external market conditions
B) Risk arising from human errors, fraud, or misconduct
C) Risk related to regulatory changes
D) Risk of technological failures
Answer: B) Risk arising from human errors, fraud, or misconduct
What is a key factor in managing operational risk effectively? A) Ignoring minor risks
B) Implementing robust internal controls and procedures
C) Speculating on market trends
D) Increasing leverage
Answer: B) Implementing robust internal controls and procedures
Which of the following tools is commonly used to identify operational risks? A) SWOT Analysis
B) Risk Register
C) VaR (Value at Risk)
D) Beta Coefficient
Answer: B) Risk Register
What does “system risk” refer to in operational risk management? A) Risk related to market fluctuations
B) Risk arising from failures or vulnerabilities in information systems
C) Risk associated with credit defaults
D) Risk of regulatory changes
Answer: B) Risk arising from failures or vulnerabilities in information systems
Which of the following is an example of an external event risk? A) System malfunction
B) Employee fraud
C) Natural disaster
D) Process inefficiency
Answer: C) Natural disaster
What is the primary purpose of “business continuity planning” in operational risk management? A) To speculate on financial markets
B) To ensure the organization can continue operations during and after a disruption
C) To maximize investment returns
D) To increase leverage
Answer: B) To ensure the organization can continue operations during and after a disruption
Which of the following best describes “fraud risk”? A) Risk of market fluctuations
B) Risk of unauthorized activities intended to deceive for financial gain
C) Risk of natural disasters
D) Risk of technological failures
Answer: B) Risk of unauthorized activities intended to deceive for financial gain
What is “operational resilience”? A) The ability to speculate on market trends
B) The ability of an organization to continue functioning despite disruptions
C) The ability to eliminate all operational risks
D) The ability to increase leverage
Answer: B) The ability of an organization to continue functioning despite disruptions
Which of the following is an example of “technology risk”? A) Changes in market interest rates
B) Software system failure
C) Employee misconduct
D) Regulatory changes
Answer: B) Software system failure
What is the role of internal controls in operational risk management? A) To eliminate all operational risks
B) To detect and prevent errors, fraud, and inefficiencies
C) To increase investment returns
D) To speculate on financial markets
Answer: B) To detect and prevent errors, fraud, and inefficiencies
Which of the following is a proactive approach to managing operational risk? A) Reacting to risks as they occur
B) Ignoring potential risks
C) Identifying and mitigating risks before they materialize
D) Accepting all risks without analysis
Answer: C) Identifying and mitigating risks before they materialize
What is a “risk and control self-assessment” (RCSA)? A) A method to speculate on market trends
B) A process where departments assess their own risks and control measures
C) A tool for increasing leverage
D) A method for calculating investment returns
Answer: B) A process where departments assess their own risks and control measures
Which of the following best describes “reputation risk”? A) Risk of financial market fluctuations
B) Risk of damage to an organization’s reputation and brand
C) Risk of natural disasters
D) Risk of system failures
Answer: B) Risk of damage to an organization’s reputation and brand
What does “key risk indicator” (KRI) mean in operational risk management? A) A metric used to predict potential risk events
B) A tool for maximizing investment returns
C) A method for eliminating all risks
D) A technique for speculating on market trends
Answer: A) A metric used to predict potential risk events
Which of the following is an example of an operational risk event? A) Interest rate changes
B) Employee strike
C) Currency fluctuations
D) Stock price drop
Answer: B) Employee strike
What is the purpose of “incident management” in operational risk? A) To increase leverage
B) To speculate on market trends
C) To respond to and manage the aftermath of operational risk events
D) To calculate investment returns
Answer: C) To respond to and manage the aftermath of operational risk events
Which of the following is a key component of a business continuity plan? A) Market analysis
B) Emergency response procedures
C) Investment strategies
D) Credit risk assessment
Answer: B) Emergency response procedures
What does “outsourcing risk” refer to? A) Risk of changes in interest rates
B) Risk of relying on third-party service providers
C) Risk of currency fluctuations
D) Risk of natural disasters
Answer: B) Risk of relying on third-party service providers
What is the primary focus of “compliance risk” management in the context of operational risk? A) Managing financial market risks
B) Ensuring adherence to laws, regulations, and internal policies
C) Reducing credit risk
D) Increasing investment returns
Answer: B) Ensuring adherence to laws, regulations, and internal policies
Which of the following is an example of a qualitative operational risk assessment technique? A) Monte Carlo Simulation
B) Scenario Analysis
C) VaR (Value at Risk)
D) Beta Coefficient
Answer: B) Scenario Analysis
What does “operational risk capital” refer to? A) Capital required to speculate on market trends
B) Capital set aside to cover potential operational risk losses
C) Capital used to increase leverage
D) Capital invested in high-risk assets
Answer: B) Capital set aside to cover potential operational risk losses
Which of the following best describes “legal risk” in operational risk management? A) Risk of natural disasters
B) Risk of legal actions or non-compliance with laws
C) Risk of credit defaults
D) Risk of market fluctuations
Answer: B) Risk of legal actions or non-compliance with laws
What is the purpose of a “control environment” in managing operational risk? A) To eliminate all risks
B) To create a framework for internal controls and risk management practices
C) To maximize investment returns
D) To speculate on financial markets
Answer: B) To create a framework for internal controls and risk management practices
Which of the following is an example of a control measure for mitigating operational risk? A) Increasing leverage
B) Implementing regular audits and inspections
C) Speculating on market trends
D) Ignoring minor risks
Answer: B) Implementing regular audits and inspections