MANAGEMENT

Detailed explanation-1: -Operational risk is the risk of losses caused by flawed or failed processes, policies, systems or events that disrupt business operations. Employee errors, criminal activity such as fraud, and physical events are among the factors that can trigger operational risk.

Detailed explanation-2: -Operational risk can occur at every level in an organisation. The type of risks associated with business and operation risk relate to: • business interruption • errors or omissions by employees • product failure • health and safety • failure of IT systems • fraud • loss of key people • litigation • loss of suppliers.

Detailed explanation-3: -A bank, acting as a trustee for a loan pool, receives less than the projected funds due to delayed repayment of certain loans. This is not an operational risk because it does not come in any category of operational risks.

Detailed explanation-4: -Operational risk has been defined by the Basel Committee on Banking Supervision1 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.