OPERATIONAL RISK AND INTEGRATED RISK MANAGEMENT
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Bank Financial Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
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.
How is the capital charge calculated under the Basic Indicator Approach for operational risk?
Under BIA, capital charge is 15% of the average annual gross income over the preceding three years, excluding years with negative or zero gross income.
What is the meaning of 'risk culture' in the context of operational risk management?
Shared values and behaviors that shape risk awareness across the organization.
What is the alpha factor in the Basic Indicator Approach for operational risk?
The alpha factor (α) in BIA is fixed at 15%, representing the industry-wide relationship between regulatory capital and the indicator (gross income) for the entire banking sector.
What is meant by 'risk aggregation' in integrated risk management?
Combining all risk exposures across categories for a consolidated risk view.
Video classes for this chapter
OPERATIONAL RISK AND INTEGRATED RISK MANAGEMENT
Operational risk and integrated risk management Part 1
Operational risk and integrated risk management Part 2
Operational risk and integrated risk management
Operational risk and integrated risk management Part 1
Operational risk and integrated risk management Part 2
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