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OPERATIONAL RISK AND INTEGRATED RISK MANAGEMENT
What is the Basel Committee's definition of operational risk?
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.
What is the primary objective of Integrated Risk Management in banks?
To manage all risks holistically across the entire organization.
Which three approaches does Basel II prescribe for measuring operational risk capital?
Basel II prescribes the Basic Indicator Approach (BIA), the Standardised Approach (SA), and the Advanced Measurement Approach (AMA) for calculating operational risk capital charge.
What is the difference between inherent risk and residual risk in operational risk?
Inherent risk exists before controls; residual risk remains after controls.
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