Financial Risk Manager Part 2
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A risk operations manager is presenting to a delegation from various financial institutions, exploring the advantages and disadvantages of diverse methods that organizations use to manage operational risk. Within this context, the manager demonstrates a case study involving a financial institution that applies the Swiss cheese model as a regulatory mechanism to mitigate operational losses stemming from processing errors in transactions. Which of the following best describes a probable outcome resulting from the institution's adoption of the Swiss cheese model?
A
Controls are structured in a way that a failure of a single key control would directly result in an operational loss.
B
Controls are structured in a way that every layer of controls would have to fail in order for an operational loss to occur.
C
When using this model, the probability of each subsequent control failure is dependent on whether a previous control for the same process failed.
D
By using this model, the probability of an extreme operational loss decreases significantly but the probability of small operational losses increases.