RSK2602
Assignment 1 Semester 1 2025
Unique #:
Due Date: 20 March 2025
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, QUESTION 1
2.1 Operational risk is speculative in nature.
False – Operational risk is not speculative; it arises from inadequate or failed
internal processes, people, and systems rather than from taking deliberate risks
for potential gains, which is the nature of speculative risks.
2.2 Where a bank is unable to meet unexpected demands for cash, it means
that the bank is illiquid and insolvent.
False – A bank that is illiquid lacks immediate cash to meet withdrawals but may
still be solvent if its assets exceed liabilities. Insolvency occurs when liabilities
exceed assets, meaning the bank cannot cover its obligations in the long term.
2.3 The three pillars of operational risk management and corporate
governance in terms of the new Basel Accord are regulation, supervision,
and control.
False – The three pillars of the Basel Accord are minimum capital requirements,
supervisory review, and market discipline. While regulation and supervision are
involved, control is not explicitly mentioned as a pillar.
2.4 Speculators in the financial markets normally have an indifferent
attitude towards risk.
False – Speculators actively seek risk in the hope of achieving high returns. They
take calculated risks rather than being indifferent, as risk is fundamental to their
investment strategies.
2.5 In terms of good corporate governance, the risk committee should be
responsible for determining the levels of risk tolerance for the organization.
Varsity Cube 2024 +27 81 278 3372
Assignment 1 Semester 1 2025
Unique #:
Due Date: 20 March 2025
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, QUESTION 1
2.1 Operational risk is speculative in nature.
False – Operational risk is not speculative; it arises from inadequate or failed
internal processes, people, and systems rather than from taking deliberate risks
for potential gains, which is the nature of speculative risks.
2.2 Where a bank is unable to meet unexpected demands for cash, it means
that the bank is illiquid and insolvent.
False – A bank that is illiquid lacks immediate cash to meet withdrawals but may
still be solvent if its assets exceed liabilities. Insolvency occurs when liabilities
exceed assets, meaning the bank cannot cover its obligations in the long term.
2.3 The three pillars of operational risk management and corporate
governance in terms of the new Basel Accord are regulation, supervision,
and control.
False – The three pillars of the Basel Accord are minimum capital requirements,
supervisory review, and market discipline. While regulation and supervision are
involved, control is not explicitly mentioned as a pillar.
2.4 Speculators in the financial markets normally have an indifferent
attitude towards risk.
False – Speculators actively seek risk in the hope of achieving high returns. They
take calculated risks rather than being indifferent, as risk is fundamental to their
investment strategies.
2.5 In terms of good corporate governance, the risk committee should be
responsible for determining the levels of risk tolerance for the organization.
Varsity Cube 2024 +27 81 278 3372
