Part 2 Mitigation

Question 1

Outsourcing is described as….

Answer 1

Entering into a contract with another company for services

To provide operational and administrative support

Question 2

What does Basel and Mifid state?

Answer 2

Banks should establish policies for managing risks associated with outsourcing activities

Question 3

What are the 4 methods for reducing operational risk exposure ?

Answer 3

Reduce likelihood of risk occurring
Reduce Impact of the risk should it occur
Transfer the risk
Retain and accept the risk

Question 4

For a risk to be insurable, what needs to be true ?

Answer 4

1. Insurer needs to be able to charge a premium high enough to cover
2. Nature of loss must be definite and financially measurable
3. Loss should be random in nature

Question 5

Think of some strategies for risk mitigation…

Answer 5

Risk sharing
Financial reserves
Diversification strategies 
Insurance
Business continuity or contingency planning