PRMIA 8009 Exam Practice Test Instant Access

Question 1

Corporate Governance ...

AEliminates risk to the greatest extent possible

BIs defined as the assembled knowledge and wisdom of the collective stakeholders in the organization, set to maximize shareholder value

CIs defined as business decision making predicated on a belief in potential rewards, balanced with the knowledge, understanding and appreciation of the risk taken to pursue those potential rewards

DIs defined as that which is best practiced within an enterprise risk management framework, guided by the PRMIA Standards of Best Practice, Conduct and Ethics above all else

Answer : C

Question 2

TMFI's internal procedures and management were

Afully aware of the uninsured risks Fortress Re were taking

Babsolutely unaware of their uninsured liabilities

Caware that they had some uninsured liabilities but thought they had enough capital to withstand any uninsured losses

DNone of the above

Answer : B

Question 3

Which of the following was not considered to be a positive outcome of the Northern Rock Case Study?

AThe role of the UK government and the possible underwriting of risks by tax-payers, and the general question of Moral Hazard

BThe reform of the Deposit Protection Scheme because of its internal inconsistencies

CIt emphasised the importance of effective governance arrangements within financial firms

DThe original successful business model had not stress tested sufficiently for the incidence of Low Probability, High Impact incidents

Answer : D

Question 4

The retrocession insurance cover was provided by

AFortress Re and other insurers

BThe Fortress Re reinsurers only

CThe fronting insurance companies

DFortress Re and their reinsurers

Answer : B

Question 5

The problems in the Orange County case can best be characterized as failures related to:

AMarket Risk

BCredit Risk

COperational and Regulatory Compliance Risk

DAll of the Above

Answer : A

Question 6

Barings Bank and Orange County have many similarities. Which of the following is NOT a similarity?

ABoth relied on a star manger, supposedly in a low risk business.

BBoth losses grew over time, but were not discovered by management until too late.

CBoth traded in illiquid and obscure markets that were easy to manipulate.

DBoth losses were eventually exposed by massive margin calls.

Answer : C

Question 7

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

PRMIA Case Studies; Standards: Governance, Best Practices and Ethics – 2015 Edition 8009 Exam Practice Test