With the enhancement of the Basel-II, the Basel Committee added a new class of risk into the calculation of risk-based capital charges. The Committee defined the operational risk as the “risk of loss resulting from inadequate or failed internal processes, people and systems or from external events”. 

This definition includes human error, fraud and malice, failures of information systems, problems related to personnel management, commercial disputes, accidents, fires, and floods. The correct answer is A.

Exporting: It is the most popular low-risk entry strategy as it involves little investment and exit is unproblematic. It is a fact that for the firms with insufficient resources for other types of internationalization strategies, exporting is the only way to reach to foreign consumers. However, success is entirely dependent on being able to identify efficient and reliable distribution channels. Other critical factors are import tariffs and quotas as well as freight costs. The correct answer is C.

Outsourcing: The contracting or subcontracting of noncore activities to free up cash, personnel, time, and facilities for activities in which a company holds competitive advantage. Companies having strengths in other areas may contract out data processing, legal, manufacturing, marketing, payroll accounting, or other aspects of their businesses to concentrate on what they do best and thus reduce average unit cost. The correct answer is C.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Bargaining power refers to capability of a negotiating party to change the deal in accordance with their request, or affect the outcome of negotiation.

1. Boundray between the banking book and trading book
2. Use and validation of banks’ internal models
3. Risk measurement under the internal models approach
4. Risk measurement under the standardised approach

All features mentioned above are the key features of revised market risk framework.

Sovereign risk, on the other hand, relates to the possibility of losses on claims to foreign government or government institutions in the form of bonds and loans.

According to the Basel Committee, market risk is defined as the risk of losses arising from movements in market prices. The correct answer is D.

Vertical M&A is a form of business combination between two firms of which one them is a supplier, or a customer to another. The correct answer is A.

Business alliance is formed when two or more firms come together to combine their business activities in different ways. Examples are mergers, acquisitions, joint ventures, strategic alliances, minority investments, franchises, and license agreements. In International Financial Reporting Standards (IFRS) these alliances are named as business combinations, and regulated under Standard Number 3. 

Stock dividend should be at dotted part

According to our text 'a local, centerless corporation that acquires a cost advantage where cheap resources are available' is not correct.

Divestiture is a sale of all of a company or all of a business/product line to another party in exchange for cash or securities

It should be Ownership dilution

There are no taxes and transaction costs

LIBOR (London Interbank Offered Rate) is a benchmark rate that represents the interest rate at which banks offer to lend funds to one another in the international interbank market for short-term loans. LIBOR is an average value of the interest-rate which is calculated from estimates submitted by the leading global banks on a daily basis. A company may raise debt financing either through bank loans or bond issues. In both types of borrowing, the interest rate may be either fixed or floating. If the rate is floating, then an index is used to determine the interest payments for each period. For example, banks borrow from international bank loans at floating rates and the index is almost always the LIBOR. Hence, a bank borrowing from the international banks pays LIBOR as the base rate and an additional risk premium. The correct answer is C.

decreasing is not correct about that

International Joint Venture (IJV): An IJV is an agreement by two or more companies, one or more is foreign, to produce a product or service together.

Merger is a combination of two firms in a way that only one firm survives after combining.

Tender Offer; The company can repurchase a number of shares through a tender offer in which it offers to buy shares at a specified price.