* Identify the monthly volatility:Monthly volatility (_monthly) = 5%
* Convert monthly volatility to annual volatility: Annual volatility (_annual) is calculated by multiplying the monthly volatility by the square root of the number of periods in a year:
=×12annual=monthly×12
* Calculate:
\sigma_{annual} = 0.05 \times \sqrt{12} \approx 0.05 \times 3.464 = 0.1732 \text{ or 17.32%} The closest option to this calculation is B. 17%.
References:
* Conversion method from monthly to annual volatility based on standard financial principles.

* Option A: Operational risk event databases are always integrated with the other components of the operational risk management program.
* Incorrect. While integration is beneficial and often sought after, it is not always the case.
Operational risk event databases can function independently and may not always be integrated with other risk management components.
* Option B: Operational risk loss event data collection software can be internally developed.
* Verified and correct. Companies have the option to develop their own software tailored to their specific needs.
* Option C: Operational risk event databases are independent elements of the operational risk management framework.
* Verified and correct. These databases can operate independently, although integration can enhance the overall risk management process.
* Option D: The implementation of a new operational risk event loss database has to incorporate an analysis of the advantages and disadvantages of external systems.
* Verified and correct. It is crucial to evaluate both internal and external solutions to determine the best fit for the organization's needs.