An example of Credit Risk events with an Operational Risk component included?

Credit Risk: Risk ofloss due to borrower default.

Operational Risk: Risk ofloss due to failed internal processes, fraud, or misconduct.

Ponzi Schemes: Fraudulent investment scamsdisguise credit risk as legitimate lendingbut collapse when new funds dry up.

Rogue Trading: Traderstake unauthorized risksthat can lead tocredit defaultsor massive financial losses.

Option A ("Failure in loan approval process")→ This is anOperational Risk issue, but does not always create Credit Risk.

Option B ("Ponzi Schemes")→ Partially correct, but does not includeRogue Trading, which is also a credit risk-related operational failure.

Option C ("Rogue Trading")→ Partially correct, but does not includePonzi Schemes, which are another key example.

Step 1: Understanding Credit Risk with an Operational Risk ComponentStep 2: Why Option D is CorrectStep 3: Why the Other Options Are Incorrect

PRMIA Operational Risk Framework– Highlights fraud-based Credit Risk events.

Basel II/III Operational Risk Guidelines– Discussestrading misconduct and credit risk misrepresentation.

PRMIA Risk References Used:

Final Conclusion:BothPonzi Schemes and Rogue Tradinginvolvecredit risk failures caused by operational misconduct, makingOption D the correct answer.