Question
Which of the following is considered an operational risk: drop in value of company's current assets. changes in foreign currency exchange rates. internal fraud, system errors and people errors. changes in market interest rates.
Answer
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Emma
Professional · Tutor for 6 years
Answer
The statement "internal fraud, system errors and people errors" is considered as an operational risk.
Explanation
## Step1: We can start by defining what each option refers to in the context of corporate risks. A drop in the value of a company's current assets aligns closer with market or credit risk. Changes in foreign currency exchange rates, and changes in market interest rates, are part of the competitive and financial management risks more typically associated with financial or trade risk. ## Step2: The only option remaining is internal fraud, system errors, and people errors. These elements are generally associated with the company’s internal operation, hence classify as operational risk. The term operational risk refers specifically to the risk of loss resulting from inadequate or failed processes, people and systems, or from external events. This definition captures issues like system failures and personnel errors, and broadly speaking, any event that disrupts the normal functioning of these operational structures is an operational risk.