Operational Risk Events & KRIs Flashcards
7 cards from real CRA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Operational Risk Events & KRIs flashcards as text
A firm notices its 'system downtime hours per month' KRI is trending upward. Which Basel II event category is most directly implicated?
Answer: Business Disruption & System Failures
Increasing system downtime directly corresponds to Business Disruption & System Failures, which covers IT and infrastructure outages.
In the context of operational risk, what does 'near-miss' event data provide?
Answer: Leading indicators of potential future losses without actual loss realization
Near-miss events reveal vulnerabilities and control weaknesses before losses materialize, making them valuable leading indicators.
Which of the following KRIs would be most relevant for monitoring 'Employment Practices & Workplace Safety' risk?
Answer: Employee grievance and complaint filing rate
The rate of employee grievances directly signals workforce relations and workplace safety risks under the Employment Practices category.
The Standardized Approach for operational risk capital under Basel II calculates capital as a percentage of:
Answer: Gross income segmented by business line
The Standardized Approach applies beta factors to gross income allocated to each of the eight defined business lines.
A compliance officer reports an increase in the 'number of regulatory breaches per quarter' KRI. This is best described as:
Answer: A lagging indicator of operational risk
Regulatory breaches are lagging indicators because they reflect failures that have already occurred, rather than predicting future risk.
Under the Loss Distribution Approach (LDA) for Advanced Measurement Approaches, frequency and severity distributions are combined using:
Answer: Monte Carlo simulation or convolution to model aggregate loss
LDA uses Monte Carlo simulation or convolution to combine separate frequency and severity distributions into an aggregate annual loss distribution.
A KRI dashboard shows the 'vendor SLA breach rate' rising. Which operational risk category does this most closely signal?
Answer: Execution, Delivery & Process Management
Vendor SLA failures indicate third-party and supply chain execution failures, which fall under Execution, Delivery & Process Management.