MULTIPLE CHOICE QUESTIONS

Select the correct answer from the options available.

In the provided answer book, write down the question number and the letter of the correct answer

next to it$.$

For example, $1\mathrm{.}1$ D

Each question is worth two $(2)$ marks.

QUESTION $3(20$ Marks$)$

$3\mathrm{.}1$ Which of the following best describes the concept of risk in a business context? $(2)$

A$.$ The likelihood of regulatory compliance issues.

B$.$ The possibility of only positive outcomes affecting the organization.

C$.$ The possibility of both positive and negative outcomes affecting the

organization.

D$.$ The certainty of negative outcomes affecting the organization.

$3\mathrm{.}2$ Which of the following examples best illustrates an operational risk event? $(2)$

A$.$ Fluctuations in foreign exchange rates affecting profit margins.

B$.$ A significant increase in the cost of raw materials.

C$.$ A data breach exposing sensitive customer information.

D$.$ A competitor launching a more innovative product.

$3\mathrm{.}3$ Which of the following statements best explains the role of a risk management

committee within an operational risk management framework?

$(2)$

A$.$ To handle all external communications and public relations.

B$.$ To provide oversight, set risk policies, and ensure the effectiveness of the risk

management process.

C$.$ To perform technical tasks related to risk data analysis.

D$.$ To execute day$-$to$-$day business operations.

$3\mathrm{.}4$ Why is it essential to have a documented risk management process in the

development of an operational risk management function?

$(2)$

A$.$ To satisfy external auditors without affecting internal practices.

B$.$ To ensure transparency, consistency, and accountability in risk management

practices.

C$.$ To provide a reference that can be ignored once the process is established.

D$.$ To reduce the need for risk communication within the organization.

$3\mathrm{.}5$ Which of the following is a key challenge in developing an effective operational risk

management function?

$(2)$

A$.$ Overemphasis on strategic risk management

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B$.$ Resistance to change and lack of risk awareness among employees.

C$.$ Excessive focus on external risk factors.

D$.$ Lack of adequate technology solutions

$3\mathrm{.}6$ In the context of operational risk identification, what is the primary advantage of using

scenario analysis?

$(2)$

A$.$ It eliminates the need for qualitative risk assessments.

B$.$ It provides exact predictions of future risk events.

C$.$ It helps to understand the impact of potential high$-$severity, low$-$likelihood

events.

D$.$ It simplifies the risk identification process by focusing on past incidents.

$3\mathrm{.}7$ In the context of operational risk identification, what is the primary advantage of using

scenario analysis?

$(2)$

A$.$ It eliminates the need for qualitative risk assessments.

B$.$ It provides exact predictions of future risk events.

C$.$ It helps to understand the impact of potential high$-$severity, low$-$likelihood

events.

D$.$ It simplifies the risk identification process by focusing on past incidents.

$3\mathrm{.}8$ During operational risk evaluation, why is it critical to assess both quantitative and

qualitative data?

$(2)$

A$.$ To focus exclusively on numerical risk scores.

B$.$ To gain a comprehensive understanding of risks from both measurable and

subjective perspectives.

C$.$ To reduce the complexity of the risk evaluation process.

D$.$ To prioritize qualitative data over quantitative data.

$3\mathrm{.}9$ What is the main benefit of conducting regular stress testing on operational risk

controls?

$(2)$

A$.$ To identify and document historical risk events.

B$.$ To assess the effectiveness of controls under extreme but plausible conditions.

C$.$ To ensure that controls comply with all regulatory requirements.

D$.$ To eliminate the need for routine risk assessments.

$3\mathrm{.}10$ Which of the following technologies can enhance the effectiveness of operational risk

monitoring by identifying patterns and anomalies?

$(2)$

A$.$ Manual data entry systems.

B$.$ Machine learning and artificial intelligence.

C$.$ Traditional filing systems.

D$.$ Basic spreadsheet software