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Risks and Risk Management in Banks
What is the primary definition of risk in the context of banking operations?
Risk is the possibility that an actual outcome will differ from the expected outcome, potentially resulting in financial loss or reputational damage for the bank.
What is residual risk in banking and how does it arise after applying risk controls?
Risk remaining after mitigation measures have been applied.
Which three broad categories of risk does the Basel Committee on Banking Supervision identify as most significant for banks?
The Basel Committee identifies credit risk, market risk, and operational risk as the three primary risk categories that banks must measure and manage under the Basel framework.
What is the difference between inherent risk and residual risk in risk assessment?
Inherent risk exists before controls; residual risk remains after controls.
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