Financial Risk Quiz

Which of the following best defines risk in a financial context?

• The probability of making profits

• The uncertainty of achieving expected returns

• The variability in budget allocation

• The growth potential of a market

Which of the following is NOT a category of financial risk?

• Market Risk

• Operational Risk

• Reputation Risk

• Strategic Risk

Strategic risk primarily arises from:

• External fraud

• Misalignment of business objectives and execution

• Interest rate mismatches

• Legal non-compliance

Which Basel document formally defined operational risk?

• Basel I

• Basel II

• Basel III

• Basel 3.1

Which of the following is NOT a sub-type of operational risk?

• Internal fraud

• Business disruption and system failures

• Currency fluctuation risk

• Execution, delivery, and process management

Which scenario best represents operational risk?

• Interest rate hikes affecting loan books

• Unauthorized trading by an employee

• A borrower defaulting on a loan

• Sovereign debt downgrade

The 2008 Société Générale trading scandal was an example of:

• Market risk

• Legal risk

• Operational risk – internal fraud

• Liquidity risk

The London Whale incident primarily illustrated weaknesses in:

• Strategic asset allocation

• Market making operations

• Risk control and oversight within operational risk

• Regulatory capital buffers

The key objective of an Operational Risk Framework is to:

• Minimize tax liabilities

• Track exchange rate changes

• Identify, assess, monitor, and control operational risk

• Determine asset allocations

Which of the following is a critical component of operational risk mitigation?

• Repo agreements

• Stress testing

• Internal controls and process documentation

• Credit enhancements