Identify the type of risk. Outline a scenario under which the risk materializes, and describe how this affects the bank. If applicable outline what steps the bank may take when the risk materializes:

Two employees of a Bank enter into positions in the options market. The size of the positions is larger than their mandate, but they are able to conceal this fact to their superior. The employees reason that they know what they are doing and are convinced they will generate substantial profits for the bank during these volatile times.