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PRMIA 8009 Exam Syllabus Topics:

SectionObjectives
Best Practices in Risk Management- Enterprise risk management implementation
- Risk identification and assessment processes
- Risk monitoring and reporting
Governance- Board responsibilities and oversight
- Corporate governance structures
- Internal controls and compliance systems
Risk Management Standards- Regulatory and industry standards
- Global risk management frameworks
Ethics in Risk Management- Conflict of interest management
- Ethical decision-making in financial risk scenarios
- Professional ethics and conduct standards

PRMIA Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition Sample Questions:

Mary Jones wants the Bylaws of PRMIA to be changed so that people can't join PRMIA unless they meet a set of criteria she has devised with her colleagues. She can do this by getting which of the following approvals:

  • A. 34 of all Members
  • B. The Board of Directors alone
  • C. The Board of Directors and a majority of the Members
  • D. The Board of Directors, but only if the Blue Ribbon Panel affirms the change
Reveal Solution  Discussion  0

Correct Answer: C  🗳️

A risk manager finds that a client is engaged in a practice that looks like money laundering.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), the risk manager should:

  • A. Report this conduct to their immediate supervisor
  • B. Respect the client's confidentiality as that takes precedence
  • C. Approach the client about the concern, regardless of what their reaction might be
  • D. Report the findings immediately to authorities
Reveal Solution  Discussion  0

Correct Answer: A  🗳️

According to the Northern Rock Case Study, what is Forced Insolvency?

  • A. The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)
  • B. The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors
  • C. The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital
  • D. The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors
Reveal Solution  Discussion  0

Correct Answer: A  🗳️

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

  • A. Both traded in illiquid and obscure markets that were easy to manipulate.
  • B. Both losses were eventually exposed by massive margin calls.
  • C. Both relied on a star manger, supposedly in a low risk business.
  • D. Both losses grew over time, but were not discovered by management until too late.
Reveal Solution  Discussion  0

Correct Answer: A  🗳️

A VaR model for managing market risk at Barings Bank in London would most likely have:

  • A. Not correctly assessed the risk in Nick Leeson's option trades as they have non-linear price characteristics
  • B. Alerted senior management to the problems before the major losses occurred
  • C. Helped very little as Nick Leeson hid many trades
  • D. Been used if senior management had ever seen it
Reveal Solution  Discussion  0

Correct Answer: C  🗳️

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