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CISI-Managing Operational Risk in Financial Institutions
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Question 1 of 10
1. Question
As a solution to the peculiarity of operational risk, identifying and categorizing operational risk for its management internally seems much more appropriate to us. In addition, banks have started to identify operational risk internally over the last few years based on the causes and effects associated with their particular exposure. A potential categorisation may have the form as follows:
Correct
• Physical danger due to destruction or disruption of infrastructure such as structures or equipment • Crime danger related of internal and international theft • Legal / responsibility risk due to working conditions, health at work or improvements in the legislative climate • Nation risk due to significant shifts in the political structure.
Incorrect
• Physical danger due to destruction or disruption of infrastructure such as structures or equipment • Crime danger related of internal and international theft • Legal / responsibility risk due to working conditions, health at work or improvements in the legislative climate • Nation risk due to significant shifts in the political structure.
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Question 2 of 10
2. Question
The accuracy of risk assessment methods typically depends crucially on the soundness of the risk model and data availability. Proper analysis of the risk requires:
Correct
Proper risk modeling requires a thorough understanding of recurrent patterns that underlie the risk under consideration. The appropriateness of those risk models is inherently linked to data availability and thus the occurrence of events. Not only do incidents help better understanding the underlying risk structures but they also provide the ground for statistical testing of risk models. Furthermore, the accuracy of risk models depends on the measurability of outcomes and thus goes hand in hand with a sound definition and understanding of effects.
Incorrect
Proper risk modeling requires a thorough understanding of recurrent patterns that underlie the risk under consideration. The appropriateness of those risk models is inherently linked to data availability and thus the occurrence of events. Not only do incidents help better understanding the underlying risk structures but they also provide the ground for statistical testing of risk models. Furthermore, the accuracy of risk models depends on the measurability of outcomes and thus goes hand in hand with a sound definition and understanding of effects.
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Question 3 of 10
3. Question
Where a company has set up a risk committee for the governing body, usually its duties may not include:
Correct
Where a company has set up a risk committee for the governing body, usually its duties may not include providing the requisite guidance, supervision and challenge to embed and sustain a supportive risk culture across the business.
Incorrect
Where a company has set up a risk committee for the governing body, usually its duties may not include providing the requisite guidance, supervision and challenge to embed and sustain a supportive risk culture across the business.
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Question 4 of 10
4. Question
To order to make transparency realistic it is important that the heads of the business line know the appropriate risk-taking limits. This needs that banks go far further in the direction of cascading risk tolerance across types of risk and across business lines. Choose the incorrect statement with regard to the stated requirement above.
Correct
The corporate organization, in all areas of activities, will be clear on how much danger the board and top management are willing to accept–addressing all threats, not just broad restrictions.
Incorrect
The corporate organization, in all areas of activities, will be clear on how much danger the board and top management are willing to accept–addressing all threats, not just broad restrictions.
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Question 5 of 10
5. Question
A project team evaluated the possibility of untimely delivery of any critical equipment at the plant. The team identified three pieces of equipment that were vital to the project, which would raise costs substantially if they arrived late. One of the suppliers, who was selected to supply a large piece of equipment, had a history of being late on other projects. The vendor was fine, and sometimes took on more work than was possible on time. This risk event (the late arrival of specified equipment) was graded as:
Correct
This danger occurrence (the established equipment arriving late) was classified as high possibility with a high effect. The other two pieces of machinery were theoretically have a significant effect on the enterprise, albeit with a small likelihood of happening.
Incorrect
This danger occurrence (the established equipment arriving late) was classified as high possibility with a high effect. The other two pieces of machinery were theoretically have a significant effect on the enterprise, albeit with a small likelihood of happening.
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Question 6 of 10
6. Question
The project team creates a risk reduction strategy after the risk has been identified and evaluated and is a plan to reduce the effects of an unforeseen occurrence. The project team mitigates the risks in different ways. Which of the strategies in question involves designing an alternative approach that has a higher probability of success but typically at a higher cost associated with completing a project task?
Correct
Risk management typically requires the creation of an alternate approach with a greater chance of completion, but generally with a greater expense compared with the achievement of the project mission.
Incorrect
Risk management typically requires the creation of an alternate approach with a greater chance of completion, but generally with a greater expense compared with the achievement of the project mission.
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Question 7 of 10
7. Question
Which of the following is not a practical example of risk reduction?
Correct
Danger management means partnering alongside others to assume blame for dangerous behaviors. Most companies operating on foreign projects would mitigate the financial, economic, labour and other forms of risk involved with international projects by forming a joint venture with a corporation based in that region.
Incorrect
Danger management means partnering alongside others to assume blame for dangerous behaviors. Most companies operating on foreign projects would mitigate the financial, economic, labour and other forms of risk involved with international projects by forming a joint venture with a corporation based in that region.
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Question 8 of 10
8. Question
What of the following plans that be used to reduce the risk of a strike by truck drivers using a train to transport the equipment required for the project. When a vital piece of equipment is late, will the effect on the schedule be mitigated by making timetable adjustments to accommodate a late delivery of equipment?
Correct
The possibility of a truck driver’s strike may be mitigated by a backup strategy that utilizes a train to carry the machinery required for the project. When the vital component of the equipment is late, the effect on the timetable will be mitigated by allowing adjustments to the plan to allow late arrival of the equipment.
Incorrect
The possibility of a truck driver’s strike may be mitigated by a backup strategy that utilizes a train to carry the machinery required for the project. When the vital component of the equipment is late, the effect on the timetable will be mitigated by allowing adjustments to the plan to allow late arrival of the equipment.
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Question 9 of 10
9. Question
Some project managers assign the contingency budget to the high-risk items in the schedule, instead of creating one line item in the contingency schedule. This strategy allows for what of the pros below?
Correct
This approach allows the project team to track the use of contingency against the risk plan. This approach also allocates the responsibility to manage the risk budget to the managers responsible for those line items. The availability of contingency funds in the line item budget may also increase the use of contingency funds to solve problems rather than finding alternative, less costly solutions. Most project managers, especially on more complex projects, manage contingency funds at the project level, with approval of the project manager required before contingency funds can be used.
Incorrect
This approach allows the project team to track the use of contingency against the risk plan. This approach also allocates the responsibility to manage the risk budget to the managers responsible for those line items. The availability of contingency funds in the line item budget may also increase the use of contingency funds to solve problems rather than finding alternative, less costly solutions. Most project managers, especially on more complex projects, manage contingency funds at the project level, with approval of the project manager required before contingency funds can be used.
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Question 10 of 10
10. Question
John is weighing the possibility of incidents that could impact the entire project during the initiation process of his transfer. Let’s say that the change by John is not only about changing jobs but also about changing cities. This will definitely incur additional risks to the project. He discusses the following risks during the implementation process that could have low effect. Which of the following examples will not have low impact/likelihood?
Correct
“The existing occupants in his building will not be willing to move out in time for him to transition onto a new position on the first day of employment.” This example has a medium probability / impact result.
Incorrect
“The existing occupants in his building will not be willing to move out in time for him to transition onto a new position on the first day of employment.” This example has a medium probability / impact result.