RSK4801
ASSIGNMENT 4 2025
UNIQUE NO.
DUE DATE: 2025
, Operational Risk Management
Question 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.
Definition of Operational Risk
According to the Basel Committee on Banking Supervision (BCBS, 2011), operational
risk is defined as “the risk of loss resulting from inadequate or failed internal processes,
people and systems, or from external events.” This definition includes legal risk but
excludes strategic and reputational risk. Operational risks typically arise from fraud,
technology failures, regulatory breaches, natural disasters, and other disruptions that
may hinder a bank’s ability to achieve its objectives.
Draft Design of the Operational Risk Report
The operational risk report should be designed in a structured format to ensure
transparency, compliance with regulatory requirements, and effective communication to
stakeholders. Below is a proposed structure:
1. Executive Summary
o Overview of key operational risk developments.
o Highlight of major incidents, emerging risks, and actions taken.
2. Governance and Oversight
o Role of the Board and risk committees.
o Oversight responsibilities and accountability structures.
3. Operational Risk Profile
o Identification of major operational risks.
o Severity and frequency ratings (risk register).
o Trends compared with prior reporting periods.
ASSIGNMENT 4 2025
UNIQUE NO.
DUE DATE: 2025
, Operational Risk Management
Question 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.
Definition of Operational Risk
According to the Basel Committee on Banking Supervision (BCBS, 2011), operational
risk is defined as “the risk of loss resulting from inadequate or failed internal processes,
people and systems, or from external events.” This definition includes legal risk but
excludes strategic and reputational risk. Operational risks typically arise from fraud,
technology failures, regulatory breaches, natural disasters, and other disruptions that
may hinder a bank’s ability to achieve its objectives.
Draft Design of the Operational Risk Report
The operational risk report should be designed in a structured format to ensure
transparency, compliance with regulatory requirements, and effective communication to
stakeholders. Below is a proposed structure:
1. Executive Summary
o Overview of key operational risk developments.
o Highlight of major incidents, emerging risks, and actions taken.
2. Governance and Oversight
o Role of the Board and risk committees.
o Oversight responsibilities and accountability structures.
3. Operational Risk Profile
o Identification of major operational risks.
o Severity and frequency ratings (risk register).
o Trends compared with prior reporting periods.
