A financial institution remains unaware of a new rule that reduces the time for sending corrected returns. This scenario exemplifies which risk?

The scenario where a financial institution remains unaware of a new rule reducing the time for sending corrected returns illustrates operational risk. Operational risk encompasses the potential for loss resulting from inadequate or failed internal processes, people, and systems, as well as external events. In this case, the institution's lack of awareness of regulatory changes demonstrates a failure in their operational practices, particularly in compliance and awareness of current rules and regulations.

Effective risk management in an operational context involves staying informed about new regulations and ensuring that personnel are trained adequately to handle such changes. Failure to do so can result in regulatory breaches or financial losses, as the institution might not be able to react appropriately within the new timeframes established by the rule. This highlights the importance of having robust processes in place to track regulatory changes and ensure compliance to mitigate operational risk effectively.