PRMIA 8009 Exam Practice Test Instant Access

Question 1

Which of the following should NOT be part of the Risk Management Infrastructure?

ADefine the organization's definition of risk management as articulated by the Board in clear and uncertain terms

BInclude financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting

CBe independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader

DReview continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole

Answer : D

Question 2

Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:

I, competitive market conditions

II. ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders

III. ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators

IV. reporting all such personnel to the local regulator

AII, III and IV only

BI, II and IV only

CAll of the above

DI and II only

Answer : D

Question 3

The key people involved in the application of good governance and risk management must:

I, be trustworthy

II. be honest

III. be approved by the local regulator

IV. treat others fairly at all times

AI, II, and III only

BIII only

CI, II, and IV only

DI, II, III and IV above

Answer : C

Question 4

Employees shall be remunerated adequately for the roles that they perform, where 'adequately' is defined

Aas being the market norm for similarly situated personnel in competitive organizations

Busing external references and benchmarks, and in a framework which is consistent with the type of risk-taking behavior expected of employees

Cusing the risk reward profile for each business line in the organization

Das commensurate with policies to attract and retain high income / revenue earners

Answer : B

Question 5

In the case of National Australia Bank, which of the following was present?

AA window of time between close of day for reporting purposes and back office checking that allowed traders to hide losses using fictitious trades

BThe Board received risk management information that was incorrect, incomplete or insufficiently detailed

CBoth A and B

DNeither A nor B

Answer : C

Question 6

According to LTCM managers:

AStress Testing looked at the 12 biggest deals with each of their top 20 counterparties

BStress Testing was not conducted

CStress Testing was not necessary because their trades were hedged

DStress Testing was elaborate, complex and conducted on their entire portfolio. It included the assumptions of a major breakdown in historical correlations

Answer : A

Question 7

Which of the following was the key contributory risk factor to the problems at LTCM in the summer of 1998?

I Model Risk

II. Lack of Transparency

III. Breakdown of Historical Correlations

IV. Over Regulation by Federal Regulators

AI and III only

BIII only

CIII and IV only

DAll of these were key elements of the problems at LTCM

Answer : B

PRMIA Case Studies; Standards: Governance, Best Practices and Ethics ? 2015 Edition Exam Practice Test