Which of the following is an example of an operational risk loss by Firm A?
A. After a surprise announcement by the central bank that interest rates would increase bond prices fall, and Firm A incurs a significant loss on its bond portfolio.
B. The data capture system of Firm A fails to capture the correct market rates causing derivative trades to be done at incorrect prices, leading to significant losses.
C. As a result of an increase in commodity prices, the share price of a company that Firm A invested in falls significantly, causing major investment losses.
D. A counterparty of Firm A fails to settle their debt to Firm A, and in doing this, they are in breach of a legal agreement to pay for services rendered.
In (B),systems failure or incorrect systems caused the problem.
The losses are directly due to an operational risk exposure A and C, an increase in interest rates and the fall in the value of an investment, are both examples of market risk exposure.
D ,failure to repay debt, is an example of credit risk exposure.