FRM Part I · FRM Exam Part I · Operational Risk
A bank's data entry clerk mistakenly enters a settlement amount with an extra zero, causing a counterparty to receive a payment ten times too large that is only partly recovered. Which Basel event type best describes this loss?
The loss belongs to execution, delivery and process management. The cause is an unintentional data entry error in settlement, which is a transaction processing failure. It is not internal fraud because no intent to deceive exists, and it does not involve workplace practices or physical asset damage.
- AExecution, delivery and process managementCorrect
- BInternal fraud
- CEmployment practices and workplace safety
- DDamage to physical assets
Explanation
An unintentional data entry error in a settlement process is a failure of transaction capture, execution and maintenance, which falls under execution, delivery and process management. It is not internal fraud because there is no intent. Employment and physical asset categories are unrelated to the cause.
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