P2.T7.500. Categories of internal operational loss data

Nicole Seaman

Director of CFA & FRM Operations
Staff member
Subscriber
Learning outcomes: Summarize the process of collecting internal operational loss data. Describe the seven categories of operational risk events as defined in Basel II and identify examples of each.

Questions:

500.1. In regard to the collection of internal operational loss data, each of the following is true EXCEPT which is false?

a. Whoever reports the loss event should be, as a preliminary default, designated as the person at fault, given that fault must be assigned upon reporting
b. The Basel operational risk categories are used to capture a risk event, not its cause; e.g., fraud might cause a loss, while damage to physical assets might be the actual loss
c. An open access database should allow anyone to be able to report an event; if this is not practical, there needs to be procedure that allows for anyone to pass an event to a designated operational risk event reporter
d. Valid entries into the loss database must be assigned to one and only one event type category (e.g., external fraud); a firm may customize its own categories but they need to be mapped to Basel categories for regulatory reporting purposes


500.2. An large international bank settles a class action lawsuit that alleges client mis-selling. To which level one event-type category is this operational loss most likely to be classified?

a. Internal fraud
b. Clients, Products and Business Practices
c. Execution, Delivery and Process Management
d. None of the above: legal risk is not an operational risk


500.3. At a large bank, because of a job vacancy due to illness, the back office misses a collateral call which leads to a significant loss upon the non-client counterparty's default. To which level one event type category is this operational loss most likely to be classified?

a. Employment Practices and Workplace Safety
b. Clients, Products, and Business Practices
c. Business Disruption and System Failures
d. Execution, Delivery, and Process Management

Answers here:
 
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