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CISI-Managing Operational Risk in Financial Institutions
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Question 1 of 10
1. Question
Public reports of a bank will enable stakeholders to assess its operational risk management strategy. Pick the wrong statement about the Disclosure Position.
Correct
Public release by a bank of sensitive details on operational risk management will contribute to a lack of accountability and the adoption of best practices in industry by market discipline. The frequency and form of disclosure will be commensurate with the size, risk level and complexity of the bank’s operations and the evolving trends in the sector.
Incorrect
Public release by a bank of sensitive details on operational risk management will contribute to a lack of accountability and the adoption of best practices in industry by market discipline. The frequency and form of disclosure will be commensurate with the size, risk level and complexity of the bank’s operations and the evolving trends in the sector.
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Question 2 of 10
2. Question
In general, a risk-appetite system includes the following elements:
Correct
A transparent characterization of the competitive activities that a corporation is equipped to engage in, and the risk thresholds that it is able to consider, and an understanding of all the different threats that the enterprise is facing, both at the level of the business entity and as a whole.
Incorrect
A transparent characterization of the competitive activities that a corporation is equipped to engage in, and the risk thresholds that it is able to consider, and an understanding of all the different threats that the enterprise is facing, both at the level of the business entity and as a whole.
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Question 3 of 10
3. Question
There are several main steps in developing a system for the risk appetite. Select one which is wrong.
Correct
Defining risk aversion parameters and thresholds for various organizational structures and classes is a critical step. Therefore, “Defining risk tolerance estimates with no limitations for different corporate systems with groups” is an erroneous assertion.
Incorrect
Defining risk aversion parameters and thresholds for various organizational structures and classes is a critical step. Therefore, “Defining risk tolerance estimates with no limitations for different corporate systems with groups” is an erroneous assertion.
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Question 4 of 10
4. Question
Consider how many things a firm has to have, to be good at risk tolerance, to understand why. Which of the requisites given are correct?
Correct
A strong, independent risk function, a sponsor at the executive level, a Board that is prepared to lead, a Board and executive who can articulate and recognise financial and non-financial risks A robust process to aggregate risk and a well-established methodology to produce risk
adjusted metrics are the correct requisites.Incorrect
strong, independent risk function, a sponsor at the executive level, a Board that is prepared to lead, a Board and executive who can articulate and recognise financial and non-financial risks A robust process to aggregate risk and a well-established methodology to produce risk
adjusted metrics are the correct requisites. -
Question 5 of 10
5. Question
The whole risk environment of the company that represents the complexity and size of its aggregated risk exposures within and across each specific risk category is called:
Correct
Risk profile: The firm’s entire risk landscape reflecting the nature and scale of its risk exposures aggregated within and across each relevant risk category.
Incorrect
Risk profile: The firm’s entire risk landscape reflecting the nature and scale of its risk exposures aggregated within and across each relevant risk category.
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Question 6 of 10
6. Question
Select the right statement that depicte the true essence of risk appetite.
Correct
Risk tolerance is better described as a selection of strategically favorable outcomes between’ too many’ and’ not enough.’ This strategy increases the risk tolerance from a risk management system to one that often involves strategic risk-taking.
Incorrect
Risk tolerance is better described as a selection of strategically favorable outcomes between’ too many’ and’ not enough.’ This strategy increases the risk tolerance from a risk management system to one that often involves strategic risk-taking.
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Question 7 of 10
7. Question
The policies and processes required to maintain a risk tolerance are the way the organization and its people communicate and do risk in all business and control functions. With the main terms in place this concept of a risk appetite system illustrates the fact that a willingness to recruit and maintain adequately qualified people in the right positions and policies is required to fully integrate risk appetite within a business.This includes:
Correct
Set the strategic plan and objectives as well as the risk strategy and risk capacity articulate and cascade risk appetite statements and limits, monitor and report risk profile versus appetite and control and correct the risk profile should it deviate from appetite, and reassess the risk appetite and, as the case may be, its strategy in the light of changes in the business, competitive or control environments.
Incorrect
Set the strategic plan and objectives as well as the risk strategy and risk capacity articulate and cascade risk appetite statements and limits, monitor and report risk profile versus appetite and control and correct the risk profile should it deviate from appetite, and reassess the risk appetite and, as the case may be, its strategy in the light of changes in the business, competitive or control environments.
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Question 8 of 10
8. Question
To the degree that: A risk-appetite system is fine is:
Correct
A risk appetite framework is good to the extent that it allows the people who set a firm’s strategy to accept in a conscious way the risks that correspond with that strategy and the underlying business model. It’s good to the extent that people within a firm who take risks on its behalf know what strategic objectives they are supporting in their risk-taking; and keep within the limits translating these objectives. It’s good to the extent that all of a firm’s material risks are understood, along with the drivers of those risks. And it’s good to the extent that risk appetite language as the key ingredient of its risk culture permeates the firm, its decision-making processes and the understanding of its own performance.
Incorrect
A risk appetite framework is good to the extent that it allows the people who set a firm’s strategy to accept in a conscious way the risks that correspond with that strategy and the underlying business model. It’s good to the extent that people within a firm who take risks on its behalf know what strategic objectives they are supporting in their risk-taking; and keep within the limits translating these objectives. It’s good to the extent that all of a firm’s material risks are understood, along with the drivers of those risks. And it’s good to the extent that risk appetite language as the key ingredient of its risk culture permeates the firm, its decision-making processes and the understanding of its own performance.
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Question 9 of 10
9. Question
How does the risk tolerance system provide support for the company? Some of the statements given out best explains it. Pick the right one.
Correct
Risk appetite framework and vocabulary help risk regulation by supplying the Board and senior management with the information and tools required to identify and convey the risks that the company is taking and will take in line with its risk tolerance and market and risk policy.
Incorrect
Risk appetite framework and vocabulary help risk regulation by supplying the Board and senior management with the information and tools required to identify and convey the risks that the company is taking and will take in line with its risk tolerance and market and risk policy.
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Question 10 of 10
10. Question
The risk assessment method is usually one of brainstorming on a project and the normal brainstorming principles apply:
Correct
The full project team should be actively involved. Potential risks should be identified by all members of the project team. No criticism of any suggestion is permitted. Any potential risk identified by anyone should be recorded, regardless of whether other members of the group consider it to be significant. All potential risks identified by brainstorming should be documented and followed up by the IPT.
Incorrect
The full project team should be actively involved. Potential risks should be identified by all members of the project team. No criticism of any suggestion is permitted. Any potential risk identified by anyone should be recorded, regardless of whether other members of the group consider it to be significant. All potential risks identified by brainstorming should be documented and followed up by the IPT.