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FRM Part II · FRM Exam Part II · Introduction to Operational Risk and Resilience

A trading desk mistakenly enters a trade as a sell instead of a buy, and the error is discovered after settlement, causing a loss. Which Basel Level 1 event type best fits?

Execution, delivery and process management is correct. The loss comes from an unintentional error in capturing and processing a trade, which Basel places in this category. Internal fraud would require deliberate intent, and systems failure or physical damage did not cause the loss.

  1. AExecution, delivery and process managementCorrect
  2. BInternal fraud
  3. CBusiness disruption and system failures
  4. DDamage to physical assets

Explanation

The loss arises from an unintentional data entry error in transaction processing. Basel places failed transaction capture, execution and maintenance under execution, delivery and process management. Internal fraud needs intent, which is absent here.

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