, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
Question 1
1. Define operational risk and compile a draft design for the operational risk report to serve as a
guideline for the risk management team responsible for drafting it.
Operational Risk Definition:
Operational risk refers to the risk of loss resulting from inadequate or failed internal processes,
systems, people, or external events. This includes risks arising from internal factors such as fraud,
employee misconduct, system failures, and external factors like natural disasters, cyberattacks, or
regulatory changes. Operational risks affect the day-to-day functioning of an organization, and their
management is critical to maintaining business continuity, minimizing losses, and ensuring
compliance with legal and regulatory requirements (Basel Committee on Banking Supervision,
2001).
Draft Design for the Operational Risk Report:
1. Introduction
Purpose of the Report: To assess and report on the operational risks faced by the bank during
the reporting period, including identification, analysis, and management strategies.
Scope: Covers the operational risks relevant to the bank’s operations for the year 2021,
post-COVID-19.
2. Executive Summary
High-level overview of key operational risks and the effectiveness of mitigation actions.
Summary of significant risks such as cyber-attacks, technology instability, and the impact of
the COVID-19 pandemic.
3. Governance and Oversight
Governance Structure: Overview of the committees responsible for risk oversight (Board Risk
Management Committee, Board Audit Committee).
Roles and Responsibilities: Details of who manages the operational risks and their
responsibilities (e.g., Chief Risk Officer, Risk Management Team).
4. Risk Identification and Assessment
Risk Categories:
Technology-related risks: Cyber-attacks, ransomware, and technological instability.
Employee-related risks: Psychological effects of COVID-19, fraud via digital channels.
Regulatory risks: Changes in compliance and regulatory constraints.
Environmental risks: Impact of climate change and extreme weather events.
Risk Matrix: Impact and frequency ratings for each identified risk based on the Bank’s
predefined severity and frequency scales (1–5).
Question 1
1. Define operational risk and compile a draft design for the operational risk report to serve as a
guideline for the risk management team responsible for drafting it.
Operational Risk Definition:
Operational risk refers to the risk of loss resulting from inadequate or failed internal processes,
systems, people, or external events. This includes risks arising from internal factors such as fraud,
employee misconduct, system failures, and external factors like natural disasters, cyberattacks, or
regulatory changes. Operational risks affect the day-to-day functioning of an organization, and their
management is critical to maintaining business continuity, minimizing losses, and ensuring
compliance with legal and regulatory requirements (Basel Committee on Banking Supervision,
2001).
Draft Design for the Operational Risk Report:
1. Introduction
Purpose of the Report: To assess and report on the operational risks faced by the bank during
the reporting period, including identification, analysis, and management strategies.
Scope: Covers the operational risks relevant to the bank’s operations for the year 2021,
post-COVID-19.
2. Executive Summary
High-level overview of key operational risks and the effectiveness of mitigation actions.
Summary of significant risks such as cyber-attacks, technology instability, and the impact of
the COVID-19 pandemic.
3. Governance and Oversight
Governance Structure: Overview of the committees responsible for risk oversight (Board Risk
Management Committee, Board Audit Committee).
Roles and Responsibilities: Details of who manages the operational risks and their
responsibilities (e.g., Chief Risk Officer, Risk Management Team).
4. Risk Identification and Assessment
Risk Categories:
Technology-related risks: Cyber-attacks, ransomware, and technological instability.
Employee-related risks: Psychological effects of COVID-19, fraud via digital channels.
Regulatory risks: Changes in compliance and regulatory constraints.
Environmental risks: Impact of climate change and extreme weather events.
Risk Matrix: Impact and frequency ratings for each identified risk based on the Bank’s
predefined severity and frequency scales (1–5).
