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CORM > Chapter 1 Flash Cards > Flashcards

Chapter 1 Flash Cards

1
Q

What is operational risk?

A

The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events

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2
Q

What are the four primary causal factors of operational risk?

A

Processes, people, systems, external events

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3
Q

What are the two most common operational risk manifestations?

A

Business continuity risk and systems/IT risk

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4
Q

Name four common operational risk impacts

A

Financial efficiency, service, reputation, lost business opportunities

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5
Q

What links cause, event and impact?

A

The bow-tie model

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6
Q

What goes between cause and event in the bow-tie model?

A

Preventative controls

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7
Q

What goes between event and impact in the bow-tie model?

A

Corrective controls

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8
Q

What are the four components of the operational risk management process?

A

Risk identification, risk assessment, risk response, risk monitoring/reporting

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9
Q

What is the first line of defence in risk governance?

A

The business units

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10
Q

What is the second line of defence in risk governance?

A

Central risk management functions

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11
Q

What is the third line of defence in risk governance?

A

Internal audit

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12
Q

What does RCSA stand for?

A

Risk and control self assessment

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13
Q

What do risk indicators measure?

A

Exposure to key risks

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14
Q

What do control indicators measure?

A

Effectiveness of key controls

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15
Q

What are near misses in operational risk?

A

Events that could have caused loss but did not

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16
Q

What is scenario analysis for?

A

Understanding severe but plausible risk exposures

17
Q

What are 3 key challenges with operational risk reporting?

A

Lack of integration between operational risk tools
Lack of common definitions and categorisation; Inappropriate tools

18
Q

What is internal fraud?

A

Misappropriation of assets by employees

19
Q

What is external fraud?

A

Theft of assets or information by external parties

20
Q

What is employment practices and workplace safety risk?

A

Discrimination, health and safety violations

21
Q

What is business disruption and systems failures risk?

A

Failures of technology infrastructure

22
Q

What is cyber risk?

A

Inability to protect digital assets from damage or theft

23
Q

What is compliance risk?

A

Failure to comply with laws and regulations

24
Q

What is legal and litigation risk?

A

Unexpected legal judgments or unenforceable contracts

25
Q

What is third party risk?

A

Losses due to vendors/partners not meeting expectations

26
Q

What are the 7 regulatory risk event types described in Basel II

A

1) Internal Fraud
2) External Fraud
3) Employment Practices and Workplace Safety
4) Clients, Products, and Business Practice
5) Damage to Physical Assets
6) Business Disruption and Systems Failures
7) Execution, Delivery, and Process Management

27
Q

What is Strategic Risk?

A

Uncertainties that may affect or may be created by an organisation’s business strategy and strategic objectives

28
Q

What is Credit Risk?

A

The risk of loss due to counterparty default. It is restricted to default or situations where the counterparty can but refuses to make payment when due

29
Q

What is Market Risk?

A

The risk of loss due to adverse economic changes in market conditions, rates or prices or fluctuations in volatility

30
Q

What is Liquidity Risk?

A

The risk of not having adequate funds available to meet financial commitments as they fall due. This may be caused by local or foreign economic conditions, a reduction in the firm’s credit rating, or situations where the firm is interested in trading an asset but cannot do so because nobody in the market wants to trade that asset

31
Q

What is Insurance Risk?

A

Also known as underwriting risk. Insurance risk is the risk of a claim being made on an insurance policy or underwriting

32
Q

What is the difference between inherent and unexpected operational risk?

A

Inherent/Expected risks occur frequently, Unexpected risks occur rarely

33
Q

What risk looks at market volatility?

A

Market Risk

34
Q

What risk looks at disaster, pandemic, cyber threats?

A

Operational Risk

CORM (33 decks)

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