A climate analyst at a research institution analyzes climate risk for various companies. The analyst examines transmission channels of climate risk as part of the risk identification process.
Which of the following examples can the analyst use to describe an operational risk transmission channel?
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. Flooding damaging an information technology company data center is a clear example of an operational risk, as it directly impacts the operations of the company due to an external physical event. This aligns with how operational risks are typically defined and identified, where the emphasis is on the disruption to business operations and processes.
'A' would lead to liquidity risk. Correct answer is D
The question is not clear whether it's about "operation risk channeled from physical risk" or "any other risk channeled through operation risk".
POORLY FRAMED IT SHOULD BE A
I agree the answer should be D, A is related to credit risk instead
Indeed, this is operational risk channelled through physical risk (pg. 121)