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Risk is present everywhere in every form in all activities. Risk can be defined as the possibility or threat of damage, injury, liability, or loss any other negative occurrence that is caused by external or internal factores and likely to impact advesely. Risk can never be eliminated totolly but only mitigated to a large extent through preemptive action.
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1. Operational risk is a subset of operations risk Operational risk is considered a subset of operations risk because it deals with the losses that arise from failed internal processes, human errors, system breakdowns, or unexpected external events. While operations risk looks at the broader risks in managing day-to-day business activities, operational risk focuses specifically on execution issues within those activities. In the banking and MBA context, understanding operational risk helps organizations improve efficiency, reduce losses, and build stronger frameworks for risk management and capital allocation. 2. Risk adjusted return on capital Risk Adjusted Return on Capital (RAROC) is a financial metric used in banking and MBA studies to measure profitability by considering the risk taken. Instead of just looking at profit, RAROC compares the return earned against the economic capital required to cover risks. This helps banks and businesses understand if an investment or loan is worth the risk. In simple terms, RAROC ensures smarter decision-making by balancing profit with risk exposure. 3. Atdd vs tdd ATDD (Acceptance Test Driven Development) and TDD (Test Driven Development) are both testing approaches, but serve different purposes. ATDD involves business stakeholders, testers, and developers working together to create acceptance tests before development starts. It ensures the product meets business requirements. TDD, on the other hand, focuses on writing unit tests before coding to ensure each function works correctly. In short, ATDD checks what the system should do, while TDD ensures how the system does it. 4. Economic capital vs regulatory capital Economic capital is an internal measure used by banks to estimate how much capital they need to cover unexpected risks and ensure financial stability. It is based on the institution’s own risk models and business profile. Regulatory capital, on the other hand, is the minimum capital banks are required to hold by regulators, such as under Basel norms. While economic capital focuses on internal risk management, regulatory capital ensures compliance and protects the broader financial system 5. What is economic capital. Economic capital is the amount of capital a bank or financial institution needs to hold to protect itself from unexpected losses. Unlike regulatory capital, which is set by regulators, economic capital is calculated internally by the institution using risk models. It covers credit risk, market risk, and operational risk, ensuring stability and business continuity. In MBA and banking studies, economic capital is seen as a key measure for performance, decision-making, and long-term sustainability. 6. Difference between tdd and atdd Test Driven Development (TDD) and Acceptance Test Driven Development (ATDD) are both software testing approaches, but focus on different stages. TDD is mainly for developers; they write unit tests before writing code, ensuring each function works correctly. ATDD, on the other hand, involves collaboration between developers, testers, and business teams. It focuses on acceptance tests based on user requirements, making sure the final system meets business goals. In short, TDD secures code quality, while ATDD secures business value.
