How should Near Misses and Opportunity Costs be treated within Operational Risk?

Near Misses in Operational Risk

A near miss is an event that could have led to a loss but was avoided or mitigated before actual

financial impact occurred.

PRMIA emphasizes that near misses should be reported, recorded, and analyzed because they

provide valuable insights into potential vulnerabilities in risk controls.

However, since they did not result in actual financial losses, they are not included in the calculation

of Operational Risk Capital.

Opportunity Costs in Operational Risk

Opportunity costs refer to the loss of potential gains due to missed strategic opportunities.

These are not directly quantifiable as operational risk losses and are not included in Operational Risk

Capital calculations.

PRMIA’s Operational Risk Framework states that operational risk is about actual losses rather than

theoretical costs.

Why Other Answers Are Incorrect

Option

Explanation

A . Ignored.

Incorrect – Near misses and opportunity costs provide valuable

insights into operational risk, so they should never be ignored.

Incorrect – While they should be recorded and analyzed, they

are not included in Operational Risk Capital calculations

because they do not result in actual losses.

B . Recorded and Analyzed. Used in

calculation of Operational Risk Capital.

D . Reported, Recorded, and Analyzed,

Used in calculation of Operational Risk

Capital.

Incorrect – Reporting, recording, and analysis are correct, but

they should not be included in capital calculations.

PRMIA Reference for Verification

PRMIA Operational Risk Management Standards – Defines near misses and opportunity costs.

Basel II & III Operational Risk Framework – Outlines the principles of operational risk capital

calculations.