Explanation:
Compliance risk is defined as the risk of legal or regulatory sanctions, financial loss, or damage to reputation a bank may suffer as a result of its failure to comply with applicable laws, regulations, codes of conduct, and standards of good practice. Advertising jobs without regard to existing labor laws is a direct violation of labor regulations, thereby qualifying as a compliance risk. Option B relates to reputational risk, while Options C and D relate to operational risks.
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Q.4 A bank based in Texas, USA, is considering outsourcing its human resource activities from an HR agency. Its risk management team is considering all potential risks that could arise from this arrangement, particularly compliance risks. Which of the following would qualify as a compliance risk?
A
Advertising jobs without regard to existing labor laws.
B
Negative public opinion because of poor performance of outsourced activities.
C
Acceptance of fake academic documents.
D
Delays in service delivery.