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What is the main focus of operational risk management in financial institutions?

• Reducing credit risk

• Managing strategic risk

• Quantifying market risk

• Measuring operational risk

Which of the following is NOT included in the types of risks associated with the Basel II definition of operational risk?

• Business interruption

• Strategic risk

• External fraud

• Internal fraud

What is the purpose of Basel II in the context of banking regulations?

• To increase market risk

• To set international standards for capital adequacy

• To eliminate credit risk

• To promote operational risk

What are the three alternative approaches offered by Basel II for measuring operational risk for regulatory capital purposes?

• Basic indicator approach, Standardized approach, Advanced approach

• Simple approach, Complex approach, Hybrid approach

• Traditional approach, Modern approach, Innovative approach

• Standard approach, Custom approach, Tailored approach

What was identified as a major cause of the global financial crisis according to the Risk and Insurance Managers Society (RIMS)?

• Historic controls and monitoring

• Over-reliance on compliance and controls

• Failure to embed enterprise risk management best practices

• Proper understanding of risk tolerances

What is the key difference between financial institutions (FIs) and non-FIs in terms of operational risks?

• FIs are not affected by global financial crises

• FIs face more risks than non-FIs

• FIs are required to quantify their operational risks

• FIs are not required to quantify their operational risks

What is the primary responsibility of line managers in financial institutions regarding operational risk management?

• Developing financial models

• Overseeing compliance and controls

• Quantifying operational risk exposure

• Implementing controls and monitoring

What is the intended benefit of raising the level of operational risk awareness in an organization?

• To optimize the level of operational risk exposure

• To reduce capital reserves

• To increase regulatory demands

• To eliminate risk management standards

What is the main challenge faced in quantifying operational risk in financial institutions?

• Absence of internal audit

• Lack of historical information

• Difficulty in identifying risks

• Inability to measure risk probabilities

What is the purpose of the Basel II Accord in relation to capital adequacy?

• To reduce the role of line managers

• To set up rigorous risk and capital management requirements

• To eliminate the need for capital reserves

• To increase lending and investment practices