Fundamentals of Payments Risk Management

Question 1

Risk associated with foreign exchange.

Answer 1

Transaction Risk

Question 2

Risk that occurs from an institution’s failure to enact appropriate policies, procedures or controls to ensure it conforms to laws, regulations, contractual arrangements and other legally binding agreements and requirements.

Answer 2

Legal Risk

Question 3

Risk that arises from a financial institution relying upon outside parties to perform services or activities on its behalf.

Answer 3

Third-Party Risk

Question 4

Risk that occurs when negative publicity regarding a financial institution’s business practices leads to a revenue loss or litigation.

Answer 4

Reputation Risk

Question 5

Risk that occurs when an ODFI permits an Originator or Third Party to use its routing number to send files directly to the ACH Operator.

Answer 5

Direct Access Risk

Question 6

Risk that occurs when a party to a transaction fails to comply, either knowingly or inadvertently, with payment system rules and policies, regulations and applicable U.S. and state law.

Answer 6

Compliance Risk

Question 7

Risk that the inability or unwillingness of one funds transfer participant to settle its commitments will cause other participants to be unable to settle their commitments.

Answer 7

Systemic Risk