, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
Question 1
1. Evaluate the accuracy of each of the following statements. Indicate whether you consider the
statement accurate (true) or not (false) and provide a full motivation for your answer.
1.1. Operational failures caused by staff are driven by error, fraud and data theft.
True
Operational failures from staff typically stem from human error (unintentional mistakes), fraud
(intentional deception for personal gain), and data theft (unauthorized access or theft of information).
These are well-recognized drivers in operational risk management.
1.2. Technology and systems are examples of external drivers of operational risk management.
False
The statement inaccurately classifies technology and systems as external drivers of operational risk
management. Technology and systems are considered internal or underlying risk factors, not external
ones. While external risks include disasters or fraud, technology-related risks, such as system failures
or hacking, are categorized as internal operational issues. Therefore, technology and systems should
not be labeled as external drivers of operational risk.
1.3. Operational risk is the risk of loss arising from human error, management failure and fraud
or shortcomings in systems or controls. This would include strategic and reputational risk.
False
The statement incorrectly includes strategic and reputational risk as part of operational risk. While
operational risk involves factors like human error, fraud, and system failures, it does not encompass
strategic or reputational risks. These two types of risk are classified separately from operational risk
and are considered distinct categories of non-financial risks.
1.4. Risk-indifferent requires no changes in the risk/reward balance in return for an increase in
risk. This attitude is usually not conducive for taking any risks to enhance the business.
False
The statement inaccurately describes the concept of "risk-indifferent." Being risk-indifferent means
there is no adjustment to the risk/reward balance despite an increase in risk, but this does not
necessarily mean it prevents taking risks to enhance the business. In fact, organizations may still take
risks within their established risk tolerance, even if the reward does not directly correlate with the
risk. The statement oversimplifies the relationship between risk attitudes and business strategy,
making it inaccurate.
Question 1
1. Evaluate the accuracy of each of the following statements. Indicate whether you consider the
statement accurate (true) or not (false) and provide a full motivation for your answer.
1.1. Operational failures caused by staff are driven by error, fraud and data theft.
True
Operational failures from staff typically stem from human error (unintentional mistakes), fraud
(intentional deception for personal gain), and data theft (unauthorized access or theft of information).
These are well-recognized drivers in operational risk management.
1.2. Technology and systems are examples of external drivers of operational risk management.
False
The statement inaccurately classifies technology and systems as external drivers of operational risk
management. Technology and systems are considered internal or underlying risk factors, not external
ones. While external risks include disasters or fraud, technology-related risks, such as system failures
or hacking, are categorized as internal operational issues. Therefore, technology and systems should
not be labeled as external drivers of operational risk.
1.3. Operational risk is the risk of loss arising from human error, management failure and fraud
or shortcomings in systems or controls. This would include strategic and reputational risk.
False
The statement incorrectly includes strategic and reputational risk as part of operational risk. While
operational risk involves factors like human error, fraud, and system failures, it does not encompass
strategic or reputational risks. These two types of risk are classified separately from operational risk
and are considered distinct categories of non-financial risks.
1.4. Risk-indifferent requires no changes in the risk/reward balance in return for an increase in
risk. This attitude is usually not conducive for taking any risks to enhance the business.
False
The statement inaccurately describes the concept of "risk-indifferent." Being risk-indifferent means
there is no adjustment to the risk/reward balance despite an increase in risk, but this does not
necessarily mean it prevents taking risks to enhance the business. In fact, organizations may still take
risks within their established risk tolerance, even if the reward does not directly correlate with the
risk. The statement oversimplifies the relationship between risk attitudes and business strategy,
making it inaccurate.
