RSK2602/1/2023

Assignment Information

Fundamentals of Operational and

Financial Risk
RSK2602

Semester 1
Department of Finance, Risk Management and
Banking

IMPORTANT INFORMATION
Please register on myUnisa, activate your myLife e-mail address,
and make sure that you have regular access to the myUnisa module site
(RSK2602-2023-S1).
Dear Student

The purpose of this document is to give you the detail of Assessment 2.

1 THE ASSIGNMENTS
SECOND SEMESTER ASSIGNMENT 01
Due date 21 April 2023
Unique Number 876673

The purpose of this assignment is to test your knowledge and understanding of

• risk, risk types and operational risk
• the operational risk management framework
• the development of an operational risk management function
• operational risk identification
• operational risk evaluation
• operational risk control
• operational risk financing
• operational risk monitoring
• the operational risk management model

Study all the chapters in the prescribed book, together with the corresponding material in the
Unisa study guide.

Answer the following questions and submit your assignment to https://my.unisa.ac.za.

Multiple-choice questions

This assignment contributes 50% towards your year mark.

Question 1

Indicate the correct statement with regard to residual risk.

1 Where residual risk shows high risk, it is regarded as a key risk indicator.
2 Inherent risk is the risk after control measures are taken into account.

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3 Residual risk is a product of control measures.

4 High residual risk requires reactive decisions to prevent the risk from occurring.

Question 2

Indicate the correct statement.

1 The likelihood of risk exposures can be rated as high, moderate and low.
2 The impact of risk exposures can be rated as probably, possible and remote.
3 The qualitative approach to risk evaluation aims to quantify risk in numerical terms.
4 Using scales to determine the impact of a potential loss is an example of a quantitative
approach.

Question 3

Stress testing …

1 is used to identify potential risk exposures.

2 simulates events that may induce extreme gains or losses through the application of
historical outcomes.
3 has the ability to assign probabilities to the future states of underlying risk factors.
4 is used to determine the behaviour of portfolios under extreme conditions.

Question 4

The following factors should be considered during risk evaluation:

a. The potential time at which the risk event is most likely to occur.
b. The potential reputational effect should the loss occur.
c. The significance of the risk and likelihood of the loss.
d. The cost of risk controls in relation to the potential loss.

Choose the correct combination:

1 b,c
2 a,b,c

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 3 b,c,d
4 a,b,c,d

Question 5

Quantitative approaches to risk evaluation include the following:

a. database modelling.
b. risk process flow analysis.
c. stochastic modelling.
d. causal modelling.

Choose the correct combination:

1 a only
2 b only
3 a,c,d
4 a,b,c,d

Question 6

Indicate the correct equation.

1 Residual risk = inherent risk + controls.

2 Residual risk = inherent risk – controls.
3 Inherent risk = key risk – controls.
4 Inherent risk = residual risk.

Question 7

In order to ensure an appropriate measure of operational risk across the organisation,

measurements should be …

a. objective.

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b. auditable.
c. transparent.
d. inconsistent.

Choose the correct combination:

1 b,c,d
2 a,c,d
3 a,b,c
4 a,b,c,d

Question 8

Risk reporting on the risk profile and business performance should be done on a … basis and
directed to …

1 annual shareholders and public.

2 daily senior management.
3 daily executive management.
4 monthly senior management.

Question 9

Maintenance and management costs include amongst others:

a. Operational risk system costs

b. Cost of segregation of duties
c. Cost of procedure manuals
d. Cost of reporting

Choose the correct combination:

1 a only
2 b,c,d

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 3 a,c,d
4 a,b,d

Question 10

Risk transfer …

1 entails the transfer of the financial effect of the risk to a third party.
2 entails the physical transfer of an organisation’s risk to a third party.
3 is suitable for most areas of operational risk.
4 is considered a cost-effective mitigation technique.

Question 11

Indicate the correct statement:

1 Retained risk may be funded or unfunded.

2 Insurance is an example of funded retained risk.
3 Unfunded retained risk is suitable for low-frequency, high-impact losses.
4 Funded risk retention is suitable for uninsurable risks.

Question 12

Internal controls and loss prevention expenses include amongst others:

a. Operational risk system costs

b. Cost of segregation of duties
c. Cost of procedure manuals
d. Cost of reporting

Choose the correct combination:

1 a,c,d
2 b,c,d
3 a only

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4 a,b,d

Question 13

Risk self-assessments …

1 is a quantitative approach to operational risk measurement.

2 is a bottom-up approach to evaluating operational risk.
3 provides an objective reflection of risk.
4 is a top-down approach to evaluating operational risk.

Question 14

Short-falls in petty cash in a business may typically be …

1 classified as a low frequency/high severity loss.

2 best dealt with by accepting it as an operating expense.
3 best dealt with through third-party insurance.
4 ignored in terms of risk control decision-making.

Question 15

Information security risk management …

1 forms an integral part of operational risk and should be managed on an annual basis.
2 aims to prevent loss or damage resulting from unavailability of timely information.
3 is a top-down management process.
4 entails a reactive approach to the management of operational risk.
[15]

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2 EXAMINATION

All the students, who submit Assessment 1 or Assessment 2 before or on the applicable
assessment due date will be admitted to the examination. Students, who do not submit an
assessment, will not be allowed to write the examination. Details of the composition of the
examination paper will be provided in Tutorial Letter 201/202, which will be available online after
the due dates of the assignments.

Students must attain a mark of at least 40% to qualify for admission to the supplementary
examination. Details about the procedure and cost for remarking examination scripts can be found
on myUnisa (https://my.unisa.ac.za).

For all other information regarding module RSK2602, you should refer to Tutorial Letter 101.

3 IN CLOSING

Do not hesitate to contact me by e-mail if you have problems with the content of this tutorial letter
or any academic aspect of the module. Please participate and interact with your e-tutors on
myUnisa, via the discussion forums, and do the self-assessments under the additional resources
tool. I wish you a fascinating and satisfying journey through the study material and trust that you
will complete the module successfully.

Enjoy the journey!

Your lecturers
Ms M Manala
Prof C Nyoka
DEPARTMENT OF FINANCE, RISK MANAGEMENT AND BANKING
©
UNISA 2023