Question
Question 8 Which of the following is not an example of operational risk: internal fraud changes in market interest rates hacking into the company's systems human error
Answer
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(276 Votes)
Leland
Master · Tutor for 5 years
Answer
B. changes in market interest rates
Explanation
Operational risk refers to the risk inherent in operational activities due to failures in processes, people, systems, or due to external events. Examples typically involve risks that directly stem from the organization's internal operations—such as internal fraud, hacking into the company's systems, or human error. These situations coincide with operational risk as the cause originates from a failure, whether intentional or unintentional, within the organization's procedure, personnel or system.On the contrary, changes in market interest rates represent a form of market risk - which describes potential losses that can occur due to changes in the financial market. They are external to an organization's operations and are part of the broader economic landscape that all entities within the market may be susceptible to.These changes can seriously impact numerous parts of a business, including imperative factors such as profitability, sales performance and the company's overall financial stability which are more directly linked to the economic state of the market or the investment climate than the internal functions of a company.Thus, while all four of the presented circumstances possess inherent risks for any business operation, 'changes in market interest rates' is an exception as it does not fall under the umbrella of operational risks but rather on market risks.