Which of the following will be a loss not covered by operational risk as defined under Basel II?

Which of the following will be a loss not covered by operational risk as defined under Basel II?
A . Earthquakes
B . Fat finger losses
C . Systems failure
D . Strategic planning

Answer: D

Explanation:

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk.

Therefore any losses from poor strategic planning will not be a part of operational risk.

Choice ‘d’ is the correct answer.

Note that floods, earthquakes and the like are covered under the definition of operational risk as losses arising from loss or damage to physical assets from natural disaster or other events.