The Standardized Approach in Calculating Capital to Cover Operational Risk

question 132

True/False

The Standardized Approach in calculating capital to cover operational risk requires DIs to separate activities into business units from which a capital charge is determined based on the amount of operational risk in each unit.

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Definitions:

Pareto Principle

The principle that states a small percentage of causes (roughly 20%) often lead to a large percentage of effects (approximately 80%).

ABC Analysis

A method of classifying inventory items into categories based on their importance, such as value or turnover rate, to optimize inventory management.

Inventory Savings

Reductions in the cost associated with holding and managing inventory, typically achieved through more efficient inventory management practices.

Tightly Controlled

Refers to systems or processes that are strictly regulated or managed to ensure desired outcomes.