During a training seminar at Firm W, a supervisor discusses several operational risks that might affect the firm in both the short-term and long-term. Can you provide an example of a loss that Firm W might experience due to an operational risk?

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After a surprise announcement by the central bank that interest rates would increase, bond prices fall and Firm W incurs a significant loss on its bond portfolio.

0.0%

The data capture system of Firm W fails to capture the correct market rates causing derivative trades to be transacted at incorrect prices, resulting in significant losses.

71.4%

As a result of an increase in commodity prices, the share price of a company that Firm W invested in falls significantly, causing major investment losses.

14.3%

A counterparty of Firm W fails to settle its debt to Firm W, and in doing this, it is in breach of a legal agreement to pay for services rendered.

14.3%

Financial Risk Manager Part 2

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During a training seminar at Firm W, a supervisor discusses several operational risks that might affect the firm in both the short-term and long-term. Can you provide an example of a loss that Firm W might experience due to an operational risk?