WHATSAPP 0645167275
WHATSAPP 0645167275
WHATSAPP 0645167275
WHATSAPP 0645167275
WHATSAPP 0645167275
WHATSAPP 0645167275
RSK2602 ASSIGNMENT 1
SEMESTER 1 2025
2.1 Operational risk is speculative in nature.
False
• Motivation: Operational risk is typically non-speculative. It refers to the risks arising
from inadequate or failed internal processes, systems, people, or external events (e.g.,
fraud, system failures, legal risks, etc.). Unlike speculative risks, which involve
uncertainties about future outcomes with a chance of gain or loss, operational risks are
more about potential losses due to operational issues. They are more focused on
minimizing risks rather than profiting from them.
2.2 Where a bank is unable to meet unexpected demands for cash, it means
that the bank is illiquid and insolvent.
False
• Motivation: If a bank is unable to meet unexpected demands for cash, it is likely
experiencing liquidity issues, meaning it does not have enough liquid assets to cover
short-term liabilities. However, this does not necessarily imply insolvency. Insolvency
occurs when a bank's liabilities exceed its assets, and it is unable to pay its debts in
the long term. A bank can be illiquid but not insolvent if it has enough assets but faces
difficulties in converting them into cash quickly.
, 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
• Motivation: The Basel II and Basel III Accords primarily define three pillars as
follows: (1) Minimum capital requirements, (2) Supervisory review process, and (3)
Market discipline. While regulation, supervision, and control are related concepts,
they are not the exact pillars outlined by the Basel Accords. The focus is on capital
adequacy, risk management, and transparency in operations.
2.4 Speculators in the financial markets normally have an indifferent attitude
towards risk.
False
• Motivation: Speculators in financial markets typically have a high risk appetite and
actively seek opportunities for profit through the anticipation of future market
movements. They are not indifferent to risk but rather willing to take on substantial
risks for the possibility of significant returns. Indifference to risk is more
characteristic of individuals who are risk-neutral, whereas speculators are generally
risk-seeking.
2.5 In terms of good corporate governance, the risk committee should be
responsible for determining the levels of risk tolerance for the organization.
True
• Motivation: A risk committee, as part of the corporate governance structure, is
responsible for overseeing the organization’s risk management framework, including
determining the levels of risk tolerance. This ensures that the organization identifies
and manages its risks effectively, aligning with its overall strategic objectives and
operational capabilities. The committee helps ensure the company stays within
acceptable risk thresholds.
2.6 Operational risk management drivers include internal, external and
regulatory drivers.
True
• Motivation: Operational risk management is influenced by a combination of internal
drivers (e.g., process inefficiencies, human errors, system failures), external drivers
(e.g., natural disasters, market fluctuations, geopolitical events), and regulatory
drivers (e.g., compliance with laws and regulations). These factors collectively shape
how operational risks are managed within an organization.
2.7 The investment in preventative controls can be considered as an upside of
operational risk.
WHATSAPP 0645167275
WHATSAPP 0645167275
WHATSAPP 0645167275
WHATSAPP 0645167275
WHATSAPP 0645167275
RSK2602 ASSIGNMENT 1
SEMESTER 1 2025
2.1 Operational risk is speculative in nature.
False
• Motivation: Operational risk is typically non-speculative. It refers to the risks arising
from inadequate or failed internal processes, systems, people, or external events (e.g.,
fraud, system failures, legal risks, etc.). Unlike speculative risks, which involve
uncertainties about future outcomes with a chance of gain or loss, operational risks are
more about potential losses due to operational issues. They are more focused on
minimizing risks rather than profiting from them.
2.2 Where a bank is unable to meet unexpected demands for cash, it means
that the bank is illiquid and insolvent.
False
• Motivation: If a bank is unable to meet unexpected demands for cash, it is likely
experiencing liquidity issues, meaning it does not have enough liquid assets to cover
short-term liabilities. However, this does not necessarily imply insolvency. Insolvency
occurs when a bank's liabilities exceed its assets, and it is unable to pay its debts in
the long term. A bank can be illiquid but not insolvent if it has enough assets but faces
difficulties in converting them into cash quickly.
, 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
• Motivation: The Basel II and Basel III Accords primarily define three pillars as
follows: (1) Minimum capital requirements, (2) Supervisory review process, and (3)
Market discipline. While regulation, supervision, and control are related concepts,
they are not the exact pillars outlined by the Basel Accords. The focus is on capital
adequacy, risk management, and transparency in operations.
2.4 Speculators in the financial markets normally have an indifferent attitude
towards risk.
False
• Motivation: Speculators in financial markets typically have a high risk appetite and
actively seek opportunities for profit through the anticipation of future market
movements. They are not indifferent to risk but rather willing to take on substantial
risks for the possibility of significant returns. Indifference to risk is more
characteristic of individuals who are risk-neutral, whereas speculators are generally
risk-seeking.
2.5 In terms of good corporate governance, the risk committee should be
responsible for determining the levels of risk tolerance for the organization.
True
• Motivation: A risk committee, as part of the corporate governance structure, is
responsible for overseeing the organization’s risk management framework, including
determining the levels of risk tolerance. This ensures that the organization identifies
and manages its risks effectively, aligning with its overall strategic objectives and
operational capabilities. The committee helps ensure the company stays within
acceptable risk thresholds.
2.6 Operational risk management drivers include internal, external and
regulatory drivers.
True
• Motivation: Operational risk management is influenced by a combination of internal
drivers (e.g., process inefficiencies, human errors, system failures), external drivers
(e.g., natural disasters, market fluctuations, geopolitical events), and regulatory
drivers (e.g., compliance with laws and regulations). These factors collectively shape
how operational risks are managed within an organization.
2.7 The investment in preventative controls can be considered as an upside of
operational risk.
