The definition of operational risk per Basel II includes which of the following:

The definition of operational risk per Basel II includes which of the following:

I. Risk of loss resulting from inadequate or failed internal processes, people and systems or from external events

II. Legal risk

III. Strategic risk

IV. Reputational risk
A . I, II, III and IV
B . II and III
C . I and III
D . I and II

View Answer

Answer: D

Explanation:

Operational risk as defined in Basel II specifically excludes strategic and reputational risk.

Therefore Choice ‘d’ is the correct answer.

Note that Basel II defines operational risk as follows:

Operational risk is defined 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.