[ 2009 FRM Sample Exam ] Operational and Integrated risk management Q20

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Bottom-up approaches analyze operational risk from the perspective of the business units that make up the entity's output.  Causal networks, connectivity matrixes, and reliability analysis are part of the process approach used to estimate the operational risk of a business unit.  Multi-factor models can be used in a top-down approach, particularly for publicly traded companies.

Reference:  Understanding Market, Credit, and Operational Risk, Allen, Boudoukh and Saunders, 20

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