Chapter 3 - Risk Definition and Taxonomy Flashcards
Is technology a risk or resource
a resource
is manual processing considered a risk
it’s a cause/risk driver- increases
probability of risk e.g. input errors and omissions
what are the Risks due to
manual processing
errors in the valuation of funds, errors in accounting records, omitting to send reports to clients
are Inadequate supervision or insufficient training considered risks
they are control failures
solution to control failiures
fix the control. Or add a secondary control
what can Inadequate supervision lead to
internal fraud, sub-standard productivity resulting in customer dissatisfaction or loss.
how should Risks be defined as
negative events, uncertainties, incidents or accidents. They should be specific and concrete
simple question to define risks
“What could go wrong?”
Basel category level 1
Event-type
category
Basel category level 2
categories (sub categories of level 1)
Basel category level 3
Activity examples
Level 2 categories of Internal fraud (level 1)
- Unauthorised activity
- Theft and Fraud
Level 2 categories of external fraud (level 1)
- Systems security
- Theft and Fraud
Risk of too much detail in risk identification
detrimental to quality of information and is difficult to review- drains effort without benefits
How many levels of regulatory categories does basel commitee recognise
2 levels of category, level 3 is just for detail/examples
what is required when for firms to categorise risks
firms are required to map risk categories to the Basel categories
what do firms not have to do when classifying risks
n doesn’t have to define a firm’s risk taxonomy these days
When was the basel classification drafted
almsot 20 years ago
what has led to tncrease in cybercrime
mass digitization
what has multiplied the risks of outsourcing project/change management, and information management
Business transformation and wider international operations
what have business practices been renamed as
conduct
what did 08 highlight the need for higher focus on
“conduct,” anti-money laundering (AML),
international sanctions and preventing tax-evasion
how many risk classification’s do Basel have
7
dictionary definition of taxonomy
a “scheme of classification.”
