Bank Director's Training | Forensic Report on Fraud

That's correct. This is a commonly used definition for operational risk used by the bank regulatory agencies and others.

That's incorrect. There are several definitions of operational risk. This is the one of the most commonly used definitions.

That's correct. Operational risk results from inadequate or failed internal process, people, systems or external events. Even the act of making a loan, which presents credit risk, also presents operational risk. For example, a borrower defaults on a loan approved by a loan officer who ignored the bank’s loan policy in making a prohibited loan is an example of a people failure that led to a loss.

That's incorrect. Operational risk is present in everything a bank does.

That's incorrect. Managing operational risk is nothing new for banks. What is new is the formality and emphasis placed on its management.

That's correct. Banks have always had to manage operational risk. From the day a bank opens for business until its last day of business, it must manage operational risk.

That's incorrect. Return motivates portfolio risk management. Expense or loss reduction motivates operational risk management.

That's correct. Portfolio risk is done primarily in contemplation of return. Operational risk management is done with expense or loss reduction in mind.

That's correct. Operational risk tends to be less predictable, and the amount of loss associated with operational risk can vary substantially depending upon circumstances.

That's incorrect. Credit, liquidity and market risk tend to be more standardized than operational risk.