Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people, and systems, or external events. This includes the risk of deficiencies in information systems or internal controls leading to unexpected losses. Options A, B, C, and E refer to market risk, credit risk, liquidity risk, and solvency risk, respectively.

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Operational Risk Is

Question 14

Multiple Choice

Operational risk is:

A) the risk to a firm's financial condition resulting from adverse movements in the level or volatility of market prices
B) the risk that a counterparty will fail to perform on an obligation
C) the risk that a firm may not be able to,or cannot easily,unwind or offset an asset or liability position at or near the previous market price because of inadequate market depth or because of disruptions in the marketplace
D) the risk that deficiencies in information systems or internal controls will result in an unexpected loss
E) the risk that a firm will become insolvent

Correct Answer: