FRM Part II · FRM Exam Part II · Risk Identification
A trader enters a trade for 10 million units instead of the intended 1 million because of a keying mistake. The bank's systems lack a size-limit check, and the error produces a loss when the position is unwound. Under the Basel event-type taxonomy, how should this loss be classified?
The loss belongs in Execution, Delivery and Process Management. The cause is an unintentional keying error and a missing control in transaction processing, not intentional fraud, a system outage, or a client-related failure.
- AInternal fraud
- BExecution, delivery and process managementCorrect
- CClients, products and business practices
- DBusiness disruption and system failures
Explanation
An unintentional data-entry or transaction-capture error falls under Execution, Delivery and Process Management. Internal fraud requires intentional misconduct, which is absent. Business disruption refers to outages, not input errors, and the client-practices category concerns product suitability or client obligations.
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